Posted by Investor666 > 2012-11-19 23:12 | Report Abuse

Hi Mr Chia, though I do not rely on their ratings as a priority in making my decisions, I do read up their analysis and comments as to why they rate the company that particular way. Often, their TP are exaggerated. For me, it is unreliable, but it does create some investor sentiment.

Only my personal opinion. Cheers!

Posted by Brien Chia Zi Hao > 2012-11-20 22:34 | Report Abuse

Hmmm...personally i've never had any of my investments hit target price, so yes perhaps they are exaggerated.

Is their research reliable?

The idea is, we find out what information is available on the open market, try to predict the undisclosed information, and then make a trade.

Very difficult to do well with just outside information because most of it is already priced in.

Do the rating agencies have access to information that we don't? do they do full disclosure? is their information and predictions reliable?

www.investingmalaysia.blogspot.com

Posted by kcchongnz > 2012-11-21 03:35 | Report Abuse

Brien, agree with you. I never take analysts recommendations at face value. I use the information they have to do my own analysis as I think they do have more information than we do. Hack, this is their rice bowl man. However, I strongly think the information they got, mostly from management is biased. Which manager won't tell the best of their company? Which manager will reveal the shortcomings of his company? Yeah even what they write is true, so many traders are watching it and the price should have been incorporated. That is why I don't look at hot stocks at all. Yeah one thing I find really amazing that their rating and target price can change within months, weeks. How can the fundamentals of a business change so fast? the problem is I think they are relying too much on market price (PE ratio) to change their target price, rather than the other way of estimating the value of the company, then compare with its price, if there is adequate margin of safety. The followings are some reasons why the analysts reports are unreliable.
• Why security analysts have such difficulty in predicting the future:
o The influence of random events
o The production of dubious reported earnings through “creative” accounting procedures
o The basic incompetence of many of the analysts themselves
o The loss of the best analysts to the sales desk or to portfolio management
o The conflicts of the interest facing security analysts at firms with large investment banking operations

Posted by dliew888 > 2012-11-21 05:09 | Report Abuse

My view an analyst is similar to weatherman and when their prediction is wrong they always blame mother nature and they never get it right in the first place.

Posted by Brien Chia Zi Hao > 2012-11-21 14:25 | Report Abuse

Hmm...but if they are doing it, and someone is paying them, it means someone thinks what they are doing is important.

who? Who perhaps what they post on public "research" and what they deliver to private clients is different? That could be the case.

if not, these people are not value adding.

Posted by Matsaham Mashuk > 2012-11-21 14:34 | Report Abuse

Hmm..I think we still need market analysts to recommend which stocks to buy and vice versa. Usually EPF,Tabung Haji,Tabung Amanah Wang Pencen and other big funds will follow recommendation from them.
We have to be smart in picking which stocks to buy and sell. How? By doing some extra work..research,reading and what ever you think suitable. Hey, nothing is free bro..Smile--)

Posted by PureBULL . > 2012-11-21 15:33 | Report Abuse

Dear Matsaham Mashuk, U said it all too correctly...

Posted by Brien Chia Zi Hao > 2012-11-21 23:16 | Report Abuse

Ah, so the EPF other big funds follow their recommendations? what if there is a conflict between them? like just take a look on the recommendations of, say, maybank, here:

http://klse.i3investor.com/servlets/ptg/1155.jsp

Not everyone is saying the same thing.

Does it make a good investment strategy, to examine the number of most recent recommendations on similar economic data, and then follow the recommendations of the majority?

Like the maybank example above, 9 out of 11 Research houses recommend BUY on Maybank. So a strategy is that since the majority of analysts are recommending Maybank, so we should buy. Plausible?

I will let you know in the future, because I went in significantly (without looking at research recommendations) at Rm9.02

So perhaps, we can see the effect of their recommendations.

P.S: today maybank closed at RM9.01

Posted by kltrader > 2012-11-22 00:04 | Report Abuse

Research and recommendations by Analysts have their merits. Sometimes the analyst covering a company may receive certain "news" in advance by speaking to the management of the company, or attending analyst briefing conducted by the company.

One good example is this research report on Perisai that expects the company to win an FPSO contract soon - http://klse.i3investor.com/blogs/kltrader/20548.jsp. 2 days after the report was out, Perisai successfully bagged the contract - http://klse.i3investor.com/blogs/kltrader/20607.jsp. So those who followed the earlier recommendations would have profited from the initial call by that analyst.

Of course there are also unscrupulous analysts who provided the recommendations solely to encourage buying or selling of shares by the readers. We just have to do our own analysis before deciding to buy or sell. Also, by comparing the Price Target recommendations from several analysts, we tend to get a more balanced view on the stock.

Once we've done enough homework and research ourselves, we will be able to distinguish honest analysts who provided fair and accurate recommendations, vs bad analysts who just don't do a professional job in the report. Personally I feel OXX recommendations sucks (company name intentionally hidden), but comments from others are welcome :)

Posted by ongtkong > 2012-11-22 00:08 | Report Abuse

kltrader, perhaps you can list down those 'unscrupulous' analysts for the benefits of i3 forummers