The last, but least acceptable, reason that most Wall Street analysts tend to be wrong much more often than they are right about the direction of the economy, the overall financial markets, and individual security prices is that the actions of many of those so-called experts suggest that they are much more concerned ...
With all due respect Equity Analysts (myself being a former analyst) are more often wrong than right, i.e. less than 50% right in the long run on recommendations. Also to hedge their position analysts sometimes flock together on stock price targets and recommendations, i.e Sell, Neutral or Buy.
While accuracy of stock picks is important, many successful investors achieve an accuracy ratio of less than 50% but have much bigger winners than losers. This makes it possible for a below-average accuracy to result in an above-average return.
Based on their 2012 study of more than 11,000 analysts from 41 countries, the overall accuracy of target prices is not very high, averaging around 18% for a three-month horizon and 30% for a 12-month horizon.
An analyst recommends a stock AFTER it has already started performing well and downgrades his recommendation AFTER the stock starts performing poorly instead of doing both these things BEFORE the fact. Conclusion: No, do not trust analyst recommendations.
Top 25 Wall Street Analysts
| Stocks with the Most Momentum | ||
|---|---|---|
| Price ($) | Market Cap ($B) | |
| L Brands Inc. ( LB) | 67.44 | 18.8 |
| Tesla Inc. ( TSLA) | 694.40 | 666.5 |
| Freeport-McMoRan Inc. ( FCX) | 39.35 | 57.6 |
Analysts are much more likely to rate stocks buy than sell, and if the beats help push stock prices higher, their track records as stock pickers look better. The conclusion: If you invest in stocks, you had better take analysts' ratings and earnings estimates with a grain of salt.
The average P/E for the S&P 500 has historically ranged from 13 to 15. For example, a company with a current P/E of 25, above the S&P average, trades at 25 times earnings. The high multiple indicates that investors expect higher growth from the company compared to the overall market.
1. The Motley Fool Stock Advisor. The Motley Fool has been around for roughly three decades and has earned its place at the head of the table among long-term stock pickers.
The top 10 Wall Street analysts of 2020 are: Jason Helfstein, Oppenheimer, Technology, 79% success rate, 30.10% average return per recommendation, 116 ratings. Colin Rusch, Oppenheimer, Technology, 82% success rate, 42.70% average return per recommendation, 88 ratings.
The best stock analysis websites are Morningstar, Tradingview, The Motley Fool, and Atom Finance. These platforms provide researchers with robust analysis, insights, and historical data. This compiled information helps individual investors make calculated and profitable decisions.
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