To: (Bob) Zumbrunnen who wrote (25695 ) 3/23/2001 6:00:40 PM From: Roger Sherman Respond to Oh, and speaking of DotBomb "ANALysts"...seattletimes.nwsource.com TIMELY STUDY FOR ANALYSTS: 100 Merrill Lynch stock analysts went to class yesterday for a lesson on how to lower ratings on the companies they cover without alienating corporate clients. "Downgrading stocks is among the toughest challenges facing analysts," says a March 15 e-mail from Eric Hemel, deputy head of U.S. equity research, to the rest of his department at the biggest U.S. brokerage. The e-mail invited employees to a session called "Managing Investment Downgrades." The topics covered , according to Hemel's e-mail were: "Working through the psychological barriers" to downgrading a stock, ,such as having "persuaded investors previously to buy the stock at a higher price" and handling "the diplomatic aspects of downgrading so as to preserve as much as possible one's access to company management." Research analysts at Wall Street firms typically try to avoid publicly lowering their view on the companies they cover. Their investment banking units earn fees offering merger advice to and selling securities for those clients. When a chief executive is unhappy with a recommendation, he may take his business elsewhere. Analyst recommendations have barely budged as stocks plummeted from their peaks in early 2000. less than 1 percent suggested selling a given stock. seminar covered how to "position downgrades, especially on previously favored stocks, vis-a-vis" Merrill's salespeople and pension-, mutual- and hedge-fund clients.Hance said the lessons on downgrading are "a little late. From the timing standpoint, it's a little embarrassing . But I think it's important that they impress upon their analysts that one of the value-added services they're supposed to be providing is a little more objective guidance, including making negative calls."
