The analysts that I have met are by and large
the brightest, most intelligent people in the business world. Few, if any, would know how to run a lemonade
stand, let alone a real business, but from an intellectual viewpoint, they
provide mostly free insightful and highly relevant material on public
companies. Here are a couple of points
to consider when reviewing their reports:
• Everyone
wants a Watergate, unless…. Analysts
live to find the errors and hidden facts in documents. This is their prime motivation (along with
the astounding compensation they typically receive!). Reputational fame in their culture rests on
being the first to identify the problems that lead to eventual doom and
gloom. They are not looking for good
news, in general, unless….
• Their
firm is doing the banking! Again the
conflict arises of banking and analysis being under the same roof. The best analyst reports are from those firms
that have absolutely no skin in the game – but this is a condition that can be
argued for and against for many of the fringe analysis firms that claim this
hallowed ground. Most have some sort of
tangential connection.
• Thus,
the source is often more important than the content to determine underlying
intentions and potential veracity of the data and conclusions. Buyer beware!
• Remember,
not just with analysts but in a very general sense, most numbers can be shaped
and used to tell a story someone wants to tell.
Just because the analysts says his/her conclusion is sound, you have to
remember that they have no motivation to state their conclusions are shaky and
unfounded!
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