After stock research was discredited seven or eight years ago because analysts had relationships with the companies that they covered that were considered tainted, Wall St. when though a purging of research and, its hand forced by the government, turned to independent analysts for more of their information.
The state of the stock research business began to stabilize. It appears that the stability may not last.
According to the FT, the opinions of Wall St. equity analysts does little to move stocks up and down and may be, in general, ignored. Analysts’ “buy” and “sell” tips have almost no impact on share prices.
Most investment banks trying to cut costs and have already chopped the number of analysts that they employ. It may be that investors are so cynical about Wall St. missing the call on the crash in the stock market that nothing investment houses can say about equities holds any water. It may be that analysts are often behind the curve on calling earnings at major companies that they are no longer considered important.
It is also possible, and perhaps probable, that the large number of financial websites and blogs are taking the place of traditional research as a place for investors, both institutional and individual. The quality of business writing and research has improved and the number of internet properties devoted to investing has multiplied making traditional research an anachronism.
Douglas A. McIntyre