DLC,
The biggest loss I had this year was courtesy of an "analyst" at Smith Barney and a broker (since fired) who listened.
A stock called "Smartalk Teleservices" (SMTK), who sell pre-paid phone cards.
In retrospect, it was exactly the same as a GNTA situation. Lots of hype, lots of pending deals, and a stock which flew unjustifiably high. Combined with an analyst who recommended the stock at 32 (the first buy), continued to recommend it at 20 after the discovery of accounting irregularities and poor earnings (the second buy, averaging down, you know...), then was still ranking it as a "table pounding buy" at 10 or so, which is the point where I returned from a 2 month stint overseas, took control, fired the broker, and sold.
Last I checked, the stock's around 3, and the analyst was recommending it because the company is "exploring strategic options" (ie: trying to sell themselves) and in the analyst's opinion is worth several times the stock price because he believes they still have the best mousetrap in the sure-to-grow phone card business. The fact that this is just a poorly run company in a brutally competitive business with no ability to differentiate itself doesn't occur to the guy.
Unfortunately, analysts often fall in love with their own ideas. I don't think Murphy is particularly worse than others. By and large his success is mostly reflective of the sectors he follows. When computers/software and biotech do well, he does very well. When they do poorly, he does very poorly. Up until recently it's been a bad few years for those sectors.
mg |
