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Technology Stocks : PSFT - 1997 Outlook [closed thread]
PSFT 0.00010000.0%Oct 29 5:00 PM EST
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To: McNabb Brothers who wrote (564)12/2/1997 9:48:00 PM
From: Chuzzlewit   of 940
 
Hank, I work for private companies -- not brokers or financial houses. Nevertheless, I'd like to comment on your second question:

can you explain to me how 34 analyst that were following COMS could miss as they just have?

The answer is really easy. These analysts are not financial analysts. They spend much of their time forecasting the unknowable -- sales and earnings. By contrast, a financial analyst spends his time trying to figure out the dynamics of a company and pinpointing areas of strength and weakness. He frequently provides the analysis needed for operational decisions such as the cost of capital or lease vs. buy, or build vs. buy. Malkiel believes that many market analysts are inept. Who, for example, forsaw the glut that hit the disk-drive makers?

You also say I'm trying to tell you that stocks tend to react 3 to 6 months in advance of what is really happening within a company! I say that this is nonsense. Look at the prices of PSFT over the past year, and compare those prices to the performance of the business. If you can find a correlation with future events you are a better man than me. Earnings remained on a fast track from the first quarter on, yet the stock price declined until April.

Stock prices reflect the perception of what may happen, not the reality of what will happen.

Regards,

Paul
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