First off, it is an undeniable fact that LSI had the maximum number of "hold" (which is really a euphemism for "sell") recommendations at or near its bottom. So it is not just one analyst who was wrong. It's more than a few, probably the majority of analysts, that got it wrong.
Second, if I am wrong in saying that analysts deliberately mislead the little guy, the only other explanation for them being so hopelessly wrong is that they are incompetent. They are expected to know a lot more about the company/ies than the investor, who is supposed to be looking up to them for investment advice. But at present, they seem to be working with little else than price momentum. If a stock keeps going up, they all rush out with their "buy" calls, and if it is going down, they issue their "hold", i.e. "sell", recommendations.
True, there may be some analysts who have made the right calls. But at least some of the time, they are right because people believe their recommendations and act on the recommendations. It becomes a self-fulfilling prophecy until the charm suddenly and mysteriously wears off, as happened in the case of Tom Kurlak.
I understand that it is impossible to call the exact tops or the bottoms, but that's not my gripe. We all have seen that a stock has a lot more "strong buy" recommendations when it is near its top and a lot more "hold"s, i.e. "sell"s when it is near the bottom. And that is what makes analysts' recommendations unreliable in general. Small investors are far better off doing their own research, based on whatever model they are comfortable with. They will do much better on their own. |
