Bonehead analysts:
Special Reports
ANALyst's Most Boneheaded Moves
By Tom King
December 20, 2000
siliconinvestor.com
Page: 1 of 1
BTBull has railed against ANALysts since our inception. We have long felt that the usefulness of these individuals has long since passed and that their tainted views border more on criminal than objective. With their companies having large stakes or market maker status with the stocks they review, we argue that the ANALyst cannot be totally objective and this apparent conflict of interest is nothing but hurtful to investors.
Despite this fact, we have come to see another side of these individuals: They are just plain stupid! Apparently, the training program for becoming an ANALyst does not include basic common sense, basic valuation analysis, basic technical analysis or humility. They all are trying to make that big call that gets them and their firm on the air and brings in more clients. Their clients are actually getting killed, but that one call will get them forgiven. What we end up seeing are upgrades of stocks at or near highs and then downgrades of stocks at lows. Why is it that we see downgrades of stocks under $5 and upgrades at $200+? Does anyone remember the $1000 a share call on Qualcomm last year or on Yahoo!?
Here are just a few of this year’s brilliant(?) moves by these snake oil salesmen:
A downgrade of Breakaway Solutions (BWAY) by Janney Montgomery Scott from ACCUMULATE to HOLD, on 12/6/00 when the stock was at $2.06. They had upgraded the stock on 6/29/00 to a BUY from ACCUMULATE when the stock was at $28. Nice call – clients lost 93% and they still have yet to tell them to sell. By the way, who downgrades a stock at $2? Now we know.
One of the biggest busts of 2000 has to be Priceline.com (PCLN). The stock has fallen from highs of $100 in March to under $2 in December. CS First Boston initiated coverage with a buy on 7/14/00 at $43 (after it had fallen 60 points in 3 months and was still in a sharp downtrend. CSFB finally told clients to HOLD on 10/6/00 at $5 a share. Nice loss of 88%. Not to be outdone, Salomon Smith Barney initiated coverage on 4/6/00 with a BUY when the stock traded at $77. They finally went to NEUTRAL on 10/5/00 at $6 a share. A nifty 92% loss.
Intel (INTC) has given ANALysts and the markets fits all year. Perhaps the most baffled might be ABN AMRO and Banc of America (BOA). BOA downgraded INTC on 9/13/00 from STRONG BUY to MARKET PERFORM, when the stock was at $61. Six days later they upgraded the stock from MARKET PERFORM to BUY at $60. They haven’t changed their rating and the stock is down to the lower $30’s.
ABN AMRO upgraded INTC to a BUY from OUTPERFORM on 9/14/00 at $60. Eight days later they joined almost everyone by downgrading to a HOLD from BUY at $48 (that day INTC fell 14 points). On 10/18/00 they upgraded INTC from HOLD to OUTPERFORM at $38. It has not yet outperformed.
TheStreet.com (TSCM) is another candidate for Bomb of the Year. However, the ANALysts covering this POS are even worse. On 2/11/00 Thomas Weisal upgraded the stock to a STRONG BUY from BUY, when the downtrending stock was at $16 (down from the $60 IPO price in May 1999). Thomas Weisel almost came to their senses on 9/20/00 when they dropped it to a MARKET PERFORM at $5. Thomas Weisel clients enjoyed a 69% drop in the span, and since then their pick has lost another 50%. Ouch!
Joining Breakaway Solutions, Priceline.com and TheStreet.com in the run for Bomb of the Year is Razorfish, Inc. (RAZF). This junk company has fallen from $50 to under $3. On 11/22/99 Morgan Stanley initiated coverage with an OUTPERFORM at $36. The rose this bad boy to under $3, when on 12/7/00 they downgraded it to a NEUTRAL. Clients lost 92%. Again, why downgrade at $2-$3, the stock is toast now. Even worse may be CS First Boston, who initiated coverage on 11/3/99 at $37 with a STRONG BUY. They finally reduced the rating on 10/27/00 to a BUY at $4, losing 89%. Since then their BUY rating has not gone well dropping another 50%.
Motorola (MOT) is another stock in a severe downtrend, yet it appears that ANALysts cannot figure it out. On 6/1/00, ABN AMRO upgraded the stock from OUTPERFORM to BUY at $33. On 10/11/00, ABN AMRO then changed its mind and downgraded the stock back to OUTPERFORM, after the stock had fallen to $21. This was a 36% loss. CS First Boston upgraded from a HOLD to a BUY on 7/13/00 at $39 and has not amended that rating. Their call has cost clients 50%.
Yahoo! (YHOO) has suffered mightily this year, falling from $220 in January to the low $30’s. Wit Soundview upgraded the stock at $124 on May 4 to a STRONG BUY. They became more cautious on September 5th at $117, downgrading to a BUY rating and then bailed on December 11 at $34, when they went to a hold. That’s a 73% hit. Not be left out, the ANALysts at Prudential initiated coverage on October 11 at $65 (that was the day everyone bailed on Yahoo!) and they still maintain the STRONG BUY rating despite the stock being at $34. Maybe the have no clients left after the stock fell 50% to bother changing their rating.
Lucent Technologies has struggled this year and has apparently perplexed ANALysts, who apparently keep trying to talk the stock out of its decline. In a beautiful display of timing, ING Barings initiated coverage on LU at $30 on 10/3/00 with a BUY. 8 days later they changed to a HOLD when the stock fell to $21. A nice 33% loss for their clients in just 7 trading days!
Merrill Lynch decided in August that China.com (CHINA) was a good play for their clients, so on August 29, they initiated coverage on the stock with a BUY rating at $15. The stock has since fallen to $5, a 66% loss in just over 3 months. Nice call!
However, we do want to give the Purple Rhino award to the ANALysts at Adams Harkness. The actually initiated coverage on Lucent with a MARKET PERFORM on 12/8/00 at $15 a share. Finally, ANALysts with the foresight to actually make a positive call at a bottom and NOT at a top.
As you can see there have been some exceptional (exceptionally bad) calls made by just about every major brokerage firm. They have not saved investors from this bear market; they may have actually thrown gas on a smoldering flame here. Many of the worst down days and rally killer days have come when these guys came out and slammed an entire sector. The biggest problem is not that the sector was slammed, but that it was downgraded after a 50% decline. The only calls we want to get from ANALysts are valuation calls. Let the companies disclose their earnings data and warn, we need to get ANALysts out of the mix, before they muck it up even worse.
Our advice, stick to your own research and the charts and let these idiots play God to no audience |
