As someone who is currently pursuing the chartered financial analyst (CFA) designation, I'm in awe of how poorly analyst estimates have tracked against actual results over the past few months. If someone were to formally record their performance figures, I wouldn't be surprised to see a standard deviation of as much as 30%. With that sort of accuracy, how valuable is it, really, to listen to analyst estimates in the first place?
Will this affect my CFA plans? No. If anything, I think that analyst performance of late points to greater visibility into what analysts actually do and how reliable their forecasts really are.
What everyone must keep in mind is that analysts are still dependent on a variety of questionable sources of information. Moreover, they ultimately have to make assumptions based on their own interpretations of the information that they were able to obtain. There is no question that they have great access to information; companies eager to maintain or improve their ratings are more than willing to help disseminate their ambitious goals and accomodate analyst inquiries. That said, you have to ask yourself how unbiased the CEO or a company's PR department may be.
For sure, analysts go beyond the company itself as a source for information. They review the industry, speak to suppliers, vendors and even competitors to get as complete a picture as possible. However, with tens of thousands of stocks traded daily, and many analysts tracking multiple companies, how much time can they dedicated to small and medium companies - those making-up the majority of companies?
No comments:
Post a Comment