On The Idiocy Of Sell Side 'Research' Lemmings

Tyler Durden's picture

Here's why you shouldn't trust sell-side research analyst expectations. Their 'normal' pattern is extrapolate trends in a lemming-like chase to be the headline-maker of the day ($1111 AAPL price-targets for instance) and then - when it's just too obvious (or when the company in question actually 'misses' what they extrapolated by a mile cough JCP cough) - they knee-jerk react at turning points - when it is already too late. So the next time someone on TV 'projects' value based on earnings or tries to convince you to part with your hard-earned money on a stock with great earnings prospects, perhaps this chart will remind you to reduce that exposure. The simple fact is - they do not know; and with the macro 'forest' becoming increasingly binary in its outlook, focusing on the micro 'trees' and supposed 'diversification' is irrelevant as correlations snap and as Goldman notes 'big revisions are the norm' as bottom-up earnings data (guided by the ever cautiously optimistic CEOs) is always slow to reflect much weaker macro data.

 

 

Chart: Goldman Sachs