Larry, It just shows that "being right" has little to do with the job as it is currently performed. My buddies who went the sell side analyst route told me that anything less than a hold on a potential banking client is unofficially grounds for firing. And even a hold can impact your bonus.
Buy side analysts, fortunately, work under a different system. At Waddell and Reed, they graded us on how each recommendation performed and that made up most of our bonus calculation. The other major portion of the bonus calculation was a ranking by fund managers as to the worth of the analysts' work.
However, nowadays, I think Waddell may be one of the few buyside firms to still actually do much original research. Many of the fund and pension manager analysts simply cull through Wall Street analyst research. And they make visits to the companies with the Wall Street types. It makes for a very cookie cutter sort of mentality.
One of my friends who is a portfolio manager, and a good one, says that you don't need buyside analysts. Just figure out which sell side analysts are good and listen to them if you must. Of course, he is a technician and doesn't really care for fundamental research at all, so his opinion is biased. But I don't think he is alone in thinking that way. Which means that there are lots of profit opportunities, long and short, for those who are willing to do work others won't or can't do. And I say, thank you cookie cutters. <VBG> |
