Why I love analyst downgrades

9 Apr

Analysts are mostly incorrect in the majority. A Bloomberg study (http://www.bloomberg.com/news/2010-10-14/goldman-gets-38-right-as-no-1-firm-rating-financial-companies-worldwide.html) supported by empirical data tracked analyst stock predictions. The study affirmed what most apt investors were more than aware of. Analyst downgrades sometimes provide a wonderful opportunity to purchase good stocks at cheaper prices and to build a sizeable position.  High frequency trading and short-term day trading has heightened these pressures; the system has become dsyfunctional. What surprises me the most is how analysts cover such a small spectrum of stocks within their sectors and yet they are still so remarkably wrong! Dan Niles, of Alpha One Capital Partners, as are others, is a great technology analyst however.

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