All - Mark Edelstone/Prudential
Allow me to comment on Mr. Edelstone's recent prediction of Intel and his recommendations.
But before I do, let's all remember very similar predictions/recommendations made by Erika Klauer (Salomon, mid October, 1996) and Drew Peck (Cowen, Mid January, 1997).
These latter two essentially said the same as Edelstone - The stock has gone too high - we reduce it from a buy (or strong buy) to a hold.
In my opinion, all analysts have but TWO recommendations -1. STRONG BUY (meaning go out and buy the damn stock) and 2. UNLOAD the damn stock as soon as you can get your broker on the phone or on the Internet.
Now, their recommendations are not, I believe, intended to predict the behavior in the stock in any long or near term fashion.
Their employers must be gratified beyond belief that they can make the stocks swing, up or down, quickly for a few days, thereby generating enormous buy or sell activity, hence large amounts of commissions on these furious transactions.
And that is what their employers ultimately want - lots of buying or selling, and they don't care which! They make money on the
transactions/commissions, not on the profits of their customers.
Thus, these three (and others like them) are successful analysts. They cause the stock (in this case Intel) to move down on heavy trading, and their employer, as well as most brokerage houses, market makers, etc., also makes lots of money in the short term.
Pure and simple. They are doing the job they are asked and paid to do, and they are successful at it.
To believe that their job is to predict the future prospects of any one company is erroneous - it is only an incidental matter whether they are right or wrong, or really understand anything fundamental about a company, or industry.
There are exceptions to this analysis, no doubt, but I believe they are just that - exceptions, and not the rule.
Paul |
