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Top equity analysts

Larry MacDonald — Wed, 20 May 2009 10:31:00 +0000

Standard & Poor’s equity research team has come out on top in the Wall Street Journal’s 2009 “Best on the Street” annual survey of equity analysts (to be released on May 26). According to S&P’s latest edition of The Outlook, twenty of its equity analysts won in 23 industry categories, with nine of them coming first in their categories. The table below lists the analysts and their sectors.

This may be worth highlighting because to come first in such a difficult year as 2008 requires going easy on the buy recommendations and coming out with relatively more sell recommendations. It underlines the fact that for independent, unbiased advice on U.S. stocks, S&P Equity Research Services is one of the best places to go. S&P clients have less to worry about when it comes to conflicts of interest with underwriting and trading departments.

The May 20 edition of The Outlook provides recommendations from some of the top analysts:

1) Mark Basham picked McDonald’s (MCD) because “the shares are likely to be seen as somewhat of a defensive play as the global economy slows, or even contracts, in 2009.”

2) Michael Jaffe selected USG (USG), which firmed up its balance sheet with the sale of $400 million of notes and will benefit from the government’s stimulus package.

3) Jim Corridore liked Continental Airlines (CAL) because of the pullback in oil prices, likely trough in the global economy, and Continental’s entry into he Star Alliance with United Air Lines.

BMO Capital best or worse?

Larry MacDonald — Tue, 02 Sep 2008 22:18:35 +0000

The research team at BMO Capital Markets has been ranked No. 1 in Canada for 27 consecutive years by the Brendan Wood International (BWI) survey of institutional investors - yet a prominent U.S. firm that ranks brokerage research, Investars.com, puts BMO Capital 37th out of 39 firms over the past four years (for firms with 100 to 499 reports).

Tallying buy, sell, and neutral ratings, BMO Capital’s reports noticeably lost money. Buy recommendations went up 52.5% of the time while sell recommendations went down 40% of the time.

Canadian peers are doing better in the Investar.com ratings. RBC Capital and CIBC World Markets, for example, have marginally positive and negative returns, respectively, for their reports over the past four years. RBC buy recommendations were up 55.4% of the time while CIBC buys were up 54.1% of the time.

So, what gives? Why is BMO so highly regarded in the BWI survey but scores so poorly in Investar.com? Maybe it has something to do with how Investar.com compiles its numbers? Or is the BWI survey just a popularity poll to see which brokerages have the best images with institutional investors?

Analysts’ recommendations useful?

Larry MacDonald — Tue, 30 Nov 1999 00:00:00 +0000

Studies of brokerage firms’ stock recommendations have focused on U.S. analysts; now there is one focusing on Canadian analysts. Published in the Spring, 2008 issue of Canadian Investment Review and authored by four professors from St. Francis Xavier University in Nova Scotia, it covers the period from 1996 to 2004.

Their findings roughly parallel those of the 1998 and the 2003 U.S. studies of Barber and associates. The authors conclude Canadian analysts’ recommendations “do have value.” The stronger the consensus buy recommendation, the more likely stock performance is to surpass the market return.

But the results are sensitive to market cycles. “The positive abnormal return for the most highly recommended firms is, however, limited to two time periods, namely the 1996-1998 (i.e. pre-crash) and 2002-2004 (i.e. post-crash) market periods. Return results for the 1999-2001 period (i.e. market bubble and crash) are less robust…”

Note to readers: Apologies for the lack of posts for the past three days. The computer servers were down.