Many are pointing at Goldman Sachs this week and laughing a bit. A week ago, they suggested that the financials had hit (or were at least approaching) a bottom and that investors would be well to reinvest in the sector. A few days later, of course, they reversed their position and now recommend an underweight investment. My question has little to do with this particular recommendation or the financial sector, but rather how analysts could waiver between such extremes within such a short period of time. What is it that they look at?
It's certainly not the fundamentals! The fundamentals of a company do not change overnight and nor do they change within a week. Analysts are supposed to be the insiders who have a window into a sector, industry and a small group of companies - providing investors with greater clarity on a publicly traded company's viability as a going-concern. When I see such a respected firm reverse their position within such a short period of time, however, they come across as just another investor on the street that's watching the headlines on the ticker tape; they're just reacting to the latest news and speculation rather than actually investigating the underlying truths.
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