Chapter 4. Analysis Tool #1: Analyzing Analysts’ Data
Disregarding day-to-day fluctuations, stock prices typically reflect the market’s expectations for the underlying company’s future earnings growth. Other things being equal, shareholders make money when expectations rise, and lose when they decline.
Stock market analysts came under fire in recent years, first for advising us to buy ridiculously overpriced tech stocks at the market peak in 2000, then in 2001 for urging us to buy Enron shortly before the energy-trader collapsed, and again in 2002 when government investigations revealed that some analysts were advising investors to buy stocks that they themselves believed were losers.
Despite their low repute, analysts’ buy/sell ratings and ...
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