To: +Narotham Reddy (18259 )
From: +Jacob Snyder Saturday, Mar 28 1998 8:46PM EST
Reply # of 18278
analyst rant:
I own some BSX (maker of surgical instruments, different industry, different analysts from AMAT), and on 3-13-98 a bunch of the analysts following the stock upgraded it. What they said was all true, but useless. The stock had just gapped up to 69 (right before the upgrades were made public). 4 months earlier, the stock was below 42. The upgrades happened AFTER a 66% climb in the stock price, with the stock near its all-time high, and at the upper end of its PE range. When the stock was cheap, they had nothing but negative comments about it. This pattern is identical to what the AMAT analysts do.
The more experienced I get as an investor, the less respect I have for analysts. They consistently make these mistakes:
1. lagging indicator. They are so afraid of being wrong, that they don't say anything until it's obvious, and then the news is already in the stock.
2. herd behavior. Their motto: "Being wrong alone is the only thing worse than being wrong."
3. 3-6 month outlook at most. In December 1997, their collective wisdom was: "BSX is one of the top two or three companies in a rapidly growing industry, it has an excellent balance sheet, proven management, excellent long-term prospects, but don't buy it because the next two quarters will be bad". Sound familiar to AMATers?
After 3 years at investing, I've simplified my strategy to this:
1. Make a short list of great companies. From this list:
2. buy when the last analyst downgrades, and
3. hold till the last analyst upgrades.
Sorry, had to get that off my chest.
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