Stick to the facts
July 12th 2007 08:53
The lawyer is one to approach when we encounter legal problems. Likewise we sought the expertise of an accountant when lodging tax returns to minimise our income tax payables. It is the expertise of these professionals that we rely to ensure we are on the right track. But when it comes to investing in stocks can we rely on stock analysts' recommendations as much as we trust the lawyers and accountants? Can the reliance be on par with lawyers and accountants?
The difference is distinguished by 'hard facts'. Lawyers and accountants work around on firm legal codes, cases, precedents, and accounting standards while stock analysts go further beyond hard historical facts but charting into unknown territory, though not entirely pure guess work, but based on hypotheses and expectations that involve certain amount of risks of making an incorrect forecast.
On the ground level, a popular remark by ordinary investors is that if all those recommendations by analysts are so accurate then there won't be any poor people anymore. However it seems even the top brass of the investment and finance community are dismissing the analysts forecasts, almost outright. HSBC global head of equity research, Graham Copley branded its in-house analysts output as useless.
Perhaps the forecasting skills of the HSBC team are relatively inferior to others as it couldn't be absolutely true that all analysts' output are entirely useless but a matter of skills and possibly a little dose of luck and intuition.
All is not lost if the 'hard facts' were used for stock analysis. Financial Times Alphaville suggested Joseph Piotroski's F-Score method as the safer bet which is based on past accounting data. The point is that sticking to the fundamentals, it seem, would put stock analysts nearer on par with the lawyers and accountants in terms of expertise reliance on an absolute scale.
F-Score? Ask your financial planner on your next trip to another round of expertise advice seeking exercise.
What about astrologers? anyone?
The difference is distinguished by 'hard facts'. Lawyers and accountants work around on firm legal codes, cases, precedents, and accounting standards while stock analysts go further beyond hard historical facts but charting into unknown territory, though not entirely pure guess work, but based on hypotheses and expectations that involve certain amount of risks of making an incorrect forecast.
On the ground level, a popular remark by ordinary investors is that if all those recommendations by analysts are so accurate then there won't be any poor people anymore. However it seems even the top brass of the investment and finance community are dismissing the analysts forecasts, almost outright. HSBC global head of equity research, Graham Copley branded its in-house analysts output as useless.
Perhaps the forecasting skills of the HSBC team are relatively inferior to others as it couldn't be absolutely true that all analysts' output are entirely useless but a matter of skills and possibly a little dose of luck and intuition.
All is not lost if the 'hard facts' were used for stock analysis. Financial Times Alphaville suggested Joseph Piotroski's F-Score method as the safer bet which is based on past accounting data. The point is that sticking to the fundamentals, it seem, would put stock analysts nearer on par with the lawyers and accountants in terms of expertise reliance on an absolute scale.
F-Score? Ask your financial planner on your next trip to another round of expertise advice seeking exercise.
What about astrologers? anyone?
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