Opening example: https://www.fool.com/investing/2020/12/28/scoop-up-10-highest-yielding-dividend-stocks-2020/ is a survey of 10 stocks, featuring many analyst prognoses. I think a lot of obvious signs are easily missed by casual observers but not by analysts. Analysts are paid to write research. I have a few ex-classmates paid pretty good salaries doing this research. I assume they have some evidence for their recommendations.

Most of the recommendations/reviews have a focus on overvalued/undervalued, over the medium term (I won’t specify how many years). This is not exactly my horizon, as I tend to buy-n-hold longer.

Site1: https://www.moneycrashers.com/stock-market-analyst-rating-accuracy/

— Quality concern: stale … Target price is more useful (in MOETF) than the rating, to feature on my blogpost titles. If a 100% BUY is given at price $97, before a surge to $152, then obviously the BUY rating is invalidated immediately.

Time horizon — Site1 says “analysts only follow 12-month time frames”. I think target audience often act on the recommendation and keep a position for years. However, Overpriced/Undervalued ratings are always tied to a price level, and loses relevance as soon as the stock experiences a big move. That’s presumably why 30 days later there will be a bunch of new research published for the same stock.

— Quality concern: selfish agenda .. Many online commentators accuse equity analysts of selfish bias, written to brainwash the lay public, for their self-interest (including indirect assistance to their paid clients). I think it’s valid suspicion and accusation. Site1 explains that analysts are more likely to rate a stock a buy than a sell. However, I want to hold a balanced view. In defense of the analysts I would point out

• The analysis is a detailed writing, not a one-sentence stock tip.  There’s a track record to each analyst. If the equity analysis is all commercial propaganda then its track record would have discredited itself. Maybe it has happened, but I see that the mainstream news still cover them
• Analysts are paid a high compensation, so there’s probably some evidence beneath their writing.
• If there’s only one analyst, then I would suspect her motive. 9 analysts all have self-interests and would unlikely to give identical ratings. However, analyts in general tend to give Buy.
• Do you have the same suspicion over Buffett’s pick?
• Site1 says A) analysts are more likely to rate a stock a buy than a sell, B) if the vast majority of analysts that cover a particular stock rate it a sell, that acts as a big red flag that something is wrong with the company.

— Concern: tcost .. reading the fine print is time-consuming and perhaps poor ROTI. Therefore, when I look at ratings I mostly look at the percentage “breakdown”. Fine prints can contain crucial details, esp. in fiancial statements, but not in analyst reports! The analysts write to attact attention, so they would not bury important details in fine prints !

In absolute terms, I spend very few hours on analyst ratings or online recommendations. Longest article I would on a stock is 100 words.  However, within my 3-min due diligence framework, media-research is a big component indeed.

Note: Unlike MOETF, Index investing requires very little media research.

— A final, big question .. Q: Let’s say we rank the various inputs (to our decision making), and let’s say 30% is a reasonable level of influence by media (analysts++), then am I too receptive/attentive?

(But Why bother with this question? I think this question might come up during my discussions with other investors. Also, the degree of influence is a non-trivial factor esp. in eq investing. )

Buffett: “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.”

Independent research .. sounds cool, esp. to an idealistic investor. In reality, it is foolhardy to buy (or sell) against visible consensus among analysts.  When too many analysts say “Overpriced” then I’m very reluctant to buy. I guess this is prudent of me. Overpaying for a stock would hurt my DYOC for years. Therefore, harmony is needed.

It’s quite common to encounter one negative forecast for my “favorite of the month”. We can either A) ignore it, B) reduce our purchase, or C) cancel it. Which option is independent? (A). We have no time to do our independent research. So I never choose (A). Since the media does affect my decision-making, how do I manage its influence? I limit my research t$cost.
* tcost .. a big factor. See section above.
* $cost .. So far I don’t feel the need to pay for advice.

— which rating sites are convenient
https://www.tipranks.com/stocks/gain/forecast .. 96,000 financial experts, including Wall Street analysts, financial bloggers, hedge funds, and corporate insiders,

• 🙂 has a “enter stock name” search box. Easily click into the box -> type “MSFT” and Enter.
• 🙂 has a link to dividend data
• 🙂 the sentiment dashboard (left menu -> StockAnalysis) … comparable to analyst rating.

https://money.cnn.com/quote/forecast/forecast.html?symb=gm ..

• to change the trailing ticker string, you need to double-click exactly on the symbol string embedded in the URL, then type the new symbol, and Enter. Slightly harder than TipRanks.
• 🙂 historical ratings .. nice presentation
• 👎 small print, esp. on count of Buy/Sell