Trading for Dummies® 2nd Edition

Chapter 7. Listening to Analyst Calls

In This Chapter

• Exploring the analyst role

• Deciphering analyst language

• Discovering how to listen

• Locating analyst calls online

• Differentiating analyst types

Stock analysts are supposed to be independent oracles who help mere mortal traders understand a company's financial future. Don't count on them, however, because they're not always looking to protect the small investor's pocketbook.

Scandals exposed by then New York Attorney General Eliot Spitzer in the early 2000s showed how analysts recommended stocks to the public to help their companies land lucrative investment banking deals, while at the same time privately writing and sending e-mails calling those same stocks junk. (This is the same Spitzer who, after becoming New York Governor, was exposed on an FBI wiretap for patronizing high-priced prostitutes. He should have stuck with the high-priced stock analysts.) Whenever you read recommendations from an analyst, you must determine whether that analyst is a buy-side analyst, sell-side analyst, or independent analyst before you ever consider using the information he or she is providing.

Analysts get much of their information from conference calls sponsored by companies when they report their earnings or make other key financial announcements. Today, individual investors are invited to listen in on more and more of these calls. You can find out a great deal about a company's prospects by listening in on analyst calls, but the language of these calls ...