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Reporting Analysts:
William, I fully agree that for an analyst to have any value, they have to advise on what IS going to happen with a stock price, NOT what has happened. Unforetunately, anybody who followed their advice 6 months ago ("strong buy" on the DD industry) is facing a substantial loss, while these analysts are currently cashing BIG bonus checks - go figure.
Okay, enough bashing these people. Best way is to profit from their "analysis" (boy, that term is applied losely here) and ranking system.
The following seems to hold (IMO):
1) If a stock price falls, a neutral (sell) ranking is placed so that the analyst who previously had a buy rating won't be sh*& on for making the wrong call. Vice versa on the up side.
2) The market reacts to these ratings, downgrade = price falls
3) The ability to look beyond the next quarter is non-existent.
4) Market fundamentals (gee, is the market for data storage growing, falling ?, what are the substitute products etc) is weighted minimally versus NEXT QUARTER'S earnings.
5) Cyclical industries (such as DD) have large swings in earnings. When demand exceeds supply, prices (earnings) rise in the short term, BUT given the minimal barriers to entry, competitors relatively quickly increase supply, you have oversupply and prices (earnings) fall and supply is reduced. (Kimberly Alexy, please note that concept).
The reason to buy a stock, is because you believe its earning potential is greater then the current price and you believe the market will figure this out and the price will rise in the future. I believe the current rating on many of the DD stocks (neutral-sell) is NOT based on that simple concept, but rather "cover my as%, of course I didn't have a buy rating on a stock which has fallen 60%".
Summary: probably good time to buy QNTM |
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