An Analyst who will gives SELL reccommendations....from
briefing.com
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SELL : There is a word rarely heard on the research side of Wall Street. Many of you can probably guess what that word is, but for those of you who may be completely stumped, allow Briefing.com to enlighten you: SELL. That's right, analysts are loathe to use that word for fear of alienating current, or prospective, clients. For them, the word is taboo, and in its place, they will downgrade stocks using placating recommendations like HOLD, NEUTRAL, UNDERPERFORM or REDUCE, which investors must learn to interpret as being euphemisms for sell. However, there are a few analysts out there who dare to be different. More often than not, they are from research firms that don't have an investment banking arm, but truth be told, their black and white investment opinions are a refreshing change from the bewildering research opinions of many firms that have a vested interest in appeasing their investment banking clients, not to mention their own colleagues. You know the opinions, the ones that go something like, "NT Hold/LT Buy, High Risk" -- whatever that means. Wonder how those same analysts would feel if they were visiting a relative in the hospital, and a doctor assessed the relative's condition by saying "NT Hold/LT Hope, High Risk." The firms will tell you there is a method to their madness, but investors, like relatives of a patient in the hospital, prefer candor over obfuscation. With that digression aside, Briefing.com can say there is no obfuscation when it comes to Prudential's banking analyst, Michael Mayo. On March 8, he initiated coverage of 19 banks and issued SELL recommendations on nine of those banks (WB [has since merged with First Union], USB, STT, NCC, MEL, KEY, FBF, ONE and BK). The basis for the bearish candor was his belief that earnings growth this decade should equal only about half the pace of last decade (7% vs. 16%). As we all know, a lot can change in the course of a decade with respect to earnings prospects, but there is no denying that Mayo made a prescient call for investors in March as each of those nine stocks is trading at a lower price now than on the day he started coverage. What's more is that the average decline in those stocks has been 20%, and that's not because of one, big loser; eight of the nine stocks have had double-digit percentage declines. Separately, it is worth noting that Mayo upgraded MEL to HOLD from Sell on Sept. 4, and today, he did the same for USB. At the time of the former call, MEL had fallen 24% since March 8. For Mayo, the word "sell" has given him credibility. It will do the same for the brokerages with investment banking units, too, because the only thing investors appreciate more than candor with an investment recommendation is candor with accuracy.-- Patrick J. O'Hare, Briefing.com |
