The terminology used by stock market research analysts is anything but uniform, many of the analysts use the conventional terms “buy”, “hold” and “sell” for making their stock market research recommendations, which makes sense, as that’s what investors do, buy, hold and sell for their personal stock portfolio.
However, there are a plethora of terms used by analysts having unclear meanings, for example a popular recommendation is “accumulate”. A lot of the stuff I purchase “accumulates”, and a lot of it ends up in the garage or the basement, so how does a person go about “accumulating” a stock, buy a little here, and a little there? Another term the analysts like to use is “strong buy”. So how does a person execute a “strong buy”? There must be a special button on the broker’s web site for executing a “strong buy”, but I’ve never seen it. “Market outperform”, “market perform”, and “market underperform” are some other analyst terminology. Does this mean we’re supposed to watch it “perform”, are we supposed to clap, exactly what are we supposed to do with this information?
A term I really like is “neutral”, when an analyst says he’s neutral, what does that mean? When my car’s in neutral it doesn’t go anywhere, I want to own stocks that are going to go up, not be parked in neutral. And then there are the eating disorder recommendations, “overweight”, “equal-weight” and “underweight”. Does overweight mean to buy the stock, or does the term imply we should gorge on the stock? There are many other terms which are equally confusing: “trading buy”, “trading sell”, “in-line”, “positive”, “negative”, “under review”, “peer perform”, “long-term buy”, “speculative investment”, and “sector perform”. What should we do with all of this information?
We’ve analyzed the record of the stock research analysts going back to February 1998 for all current stocks listed on the Nasdaq, NYSE and American stock exchanges. Stocks for companies going belly up or delisted are not included as are companies that have been acquired by or merged with other companies, and analysts without a recommendation issued in 2006 were also not considered. For this analysis, we assumed “market outperform” means a buy, “market underperform” means the stock is to be sold, etc.
Another issue we must take into consideration is that analysts sometimes recommend a stock for a buy, and then cease to cover the stock, but never issue a sell recommendation, for this case we just assumed we’re supposed to continue holding the stock. This behavior seems a little inconsiderate, as the analyst convinces a person to purchase a position, then just leaves them there holding the stock without any recommendation as to what they are supposed to do with it.
The results of our analysis are show below:
| Analyst | Start Date |
End Date |
Best Pick |
Best Pick % Ret |
Worst Pick |
Worst Pick % Ret |
# Co’s Cvrd |
% Right |
Avg % Ret |
S&P 500 % Ret |
% Ret Over S&P 500 |
| AG Edwards |
Mar98 | May06 | PMK | 1696% | ANLT | -100% | 694 | 68% | 51% | 22% | 29% |
| Adam Harkness |
Mar98 | Jan06 | CTSH | 4825% | EMRG | -100% | 331 | 45% | 32% | 17% | 15% |
| Am Tech/JSA Research |
May05 | May06 | AMKR | 102% | CNCT | -34% | 48 | 56% | 5% | 7% | -2% |
| Avondale Partners |
Aug03 | May06 | PSYS | 394% | TRMM | -68% | 81 | 65% | 27% | 31% | -4% |
| B. Riley |
Apr02 | Apr06 | CRDN | 1155% | OLGC | -64% | 51 | 59% | 52% | 19% | 33% |
| BB&T Capital Mkts |
Mar00 | Jun06 | PPDI | 799% | VERT | -100% | 269 | 72% | 55% | -14% | 69% |
| Banc of America Sec |
May99 | May06 | FRO | 2281% | ICGE | -100% | 993 | 61% | 39% | -1% | 40% |
| Barrington Research |
Jul99 | May06 | IBKC | 362% | PRGX | -94% | 90 | 67% | 31% | -5% | 36% |
| Bear Stearns |
Mar98 | Jun06 | GIL | 2365% | GOAM | -100% | 751 | 61% | 57% | 17% | 40% |
| Bernstein | Aug01 | Apr06 | GLW | 363% | PIR | -57% | 96 | 74% | 44% | 5% | 39% |
| Brean Murray |
Aug98 | Jun06 | ASFI | 410% | AKSY | -87% | 161 | 48% | 13% | 17% | -4% |
| CE Unterberg Towbin |
Oct98 | May06 | CNQR | 738% | GOAM | -100% | 247 | 38% | 4% | 23% | -19% |
| CIBC World Market |
May99 | Jun06 | VTR | 1516% | RBAK | -100% | 806 | 56% | 43% | 0% | 43% |
| CL King |
Dec04 | Jun06 | AFCE | 171% | PQE | -67% | 46 | 65% | 15% | 7% | 8% |
| Credit Suisse |
Feb98 | May06 | PR | 6144% | VERT | -100% | 1238 | 64% | 64% | 23% | 41% |
| Calyon Securities |
Mar05 | May06 | DNR | 114% | FRNT | -32% | 58 | 67% | 12% | 9% | 3% |
| Caris and Co. |
Jun03 | Jun06 | CELG | 420% | GENR | -81% | 160 | 50% | 8% | 27% | -19% |
| Citigroup | Aug05 | May06 | HANS | 216% | IDIX | -56% | 196 | 62% | 8% | 3% | 5% |
| Cowen and Co |
Mar98 | Jun06 | PPDI | 534% | ARDM | -98% | 32 | 50% | 40% | 23% | 17% |
| DA Davidson |
Aug98 | Jun06 | AMIE | 613% | PLB | -89% | 144 | 72% | 44% | 20% | 24% |
| Deutsche Securities |
Jul98 | Jun06 | MDR | 660% | DRL | -83% | 605 | 68% | 37% | 10% | 27% |
| Dougherty and Co. |
Feb01 | May06 | TASR | 582% | ISIG | -84% | 79 | 58% | 35% | 2% | 33% |
| FTN Midwest |
Oct03 | Jun06 | GPN | 114% | ALGN | -60% | 76 | 66% | 11% | 23% | -12% |
| Ferris Baker |
Nov98 | May06 | DECK | 684% | VYYO | -89% | 185 | 67% | 36% | 13% | 23% |
| First Albany |
Feb02 | Jun06 | SWN | 918% | ATAR | -85% | 341 | 56% | 30% | 16% | 14% |
| First Analysis Sec. |
Sep99 | Jun06 | TTI | 1716% | ARBA | -99% | 61 | 49% | 53% | -2% | 55% |
| Friedman Billings |
Apr98 | May06 | NEU | 7053% | ITWO | -98% | 519 | 65% | 67% | 16% | 51% |
| Global Crown Capital |
Aug05 | Jun06 | NVDA | 44% | CMOS | -50% | 20 | 55% | 4% | 5% | -1% |
| Goldman Sachs |
Feb98 | Jun06 | NEU | 1306% | ICGE | -100% | 886 | 66% | 56% | 25% | 31% |
| HSBC Securities |
Apr98 | May06 | BRG | 264% | FTE | -69% | 39 | 62% | 32% | 18% | 14% |
| Harris Nesbitt |
Jul03 | Jun06 | TXU | 349% | PARS | -87% | 138 | 62% | 12% | 30% | -18% |
| Hibernia Southcoast Capital |
Oct04 | Apr06 | DO | 144% | DRL | -72% | 61 | 75% | 27% | 16% | 11% |
| Hilliard Lyons |
Apr98 | May06 | TOFC | 24% | LANV | -16% | 24 | 67% | 4% | 14% | -10% |
| Investec | Jun02 | Jan06 | LIFC | 1454% | ESST | -85% | 38 | 71% | 112% | 25% | 87% |
| J.P. Morgan |
Mar98 | Jun06 | NEU | 3555% | ICGE | -100% | 1063 | 67% | 47% | 20% | 27% |
| JMP Securities |
Jul02 | Jun06 | UPFC | 351% | GNTA | -87% | 260 | 59% | 22% | 36% | -14% |
| Janco Partners |
Oct04 | Jun06 | BWNG | 141% | COOL | -85% | 30 | 47% | 3% | 13% | -10% |
| Janney Montgomery |
Feb99 | May06 | URBN | 931% | VERT | -100% | 204 | 66% | 48% | 5% | 43% |
| Jefferies | Apr98 | Jun06 | XLG | 1838% | RBAK | -100% | 650 | 65% | 51% | 17% | 34% |
| Kaufman Bros. |
Feb99 | Jun06 | GYI | 6444% | FTGX | -100% | 162 | 43% | 54% | 1% | 53% |
| Keefe Bruyette |
Mar98 | Jun06 | NEU | 1495% | PXT | -84% | 139 | 79% | 44% | 21% | 23% |
| KeyBanc Capital Mkts/ McDonald |
Apr04 | May06 | ISRG | 603% | JAS | -56% | 213 | 71% | 25% | 13% | 12% |
| Ladenburg Thalman |
Oct98 | May06 | ASCA | 1335% | VLTS | -97% | 97 | 46% | 36% | 21% | 15% |
| Lazard Captial |
Nov05 | May06 | NTRI | 43% | WRNC | -31% | 22 | 45% | -3% | 6% | -9% |
| Leerink Swann |
Jul03 | May06 | ILMN | 139% | DYAX | -72% | 51 | 43% | 3% | 30% | -27% |
| Lehman Brothers |
Feb98 | May06 | FRO | 2281% | ICGE | -100% | 1153 | 65% | 49% | 23% | 26% |
| Longbow | Aug04 | May06 | TIE | 402% | PLAY | -56% | 41 | 78% | 44% | 19% | 25% |
| Matrix Research |
Jan06 | Jun06 | IACI | 371% | PLAY | -55% | 129 | 44% | 1% | 1% | 0% |
| Merrill Lynch |
Feb98 | Apr06 | SID | 2302% | VERT | -100% | 1187 | 65% | 70% | 25% | 45% |
| Merriman Curhan Ford |
Oct03 | Jun06 | AGN | 462% | SQNM | -83% | 166 | 46% | 9% | 23% | -14% |
| Miller Johnson |
Jan04 | Jun06 | SMSI | 190% | CRAY | -74% | 32 | 50% | 22% | 12% | 10% |
| Moors and Cabot |
Sep03 | Feb06 | LSI | 86% | ASYT | -77% | 65 | 60% | 6% | 25% | -19% |
| Morgan Joseph |
Jan05 | Jun06 | ADTN | 594% | XMSR | -58% | 49 | 55% | 25% | 8% | 17% |
| Morgan Keegan |
May98 | May06 | QSII | 1532% | PRW | -95% | 204 | 66% | 73% | 17% | 56% |
| Morgan Stanley |
Mar98 | Jun06 | FRO | 2281% | GOAM | -100% | 1090 | 65% | 49% | 23% | 26% |
| Needham | Nov98 | May06 | HOLX | 586% | ITWO | -99% | 420 | 49% | 19% | 13% | 6% |
| Nollenberger Capital |
Oct05 | Apr06 | SHFL | 56% | PALM | -28% | 24 | 54% | 4% | 9% | -5% |
| Oppenheimer | Sep03 | May06 | TSO | 384% | VION | -65% | 212 | 56% | 9% | 26% | -17% |
| Pacific Crest |
Mar99 | May06 | WFMI | 588% | VERT | -100% | 118 | 46% | 21% | 0% | 21% |
| Pacific Growth Equities |
Dec99 | Jun06 | CWTR | 1030% | ITWO | -99% | 235 | 50% | 26% | -10% | 36% |
| Piper Jaffray |
Feb98 | May06 | STRL | 6132% | PRGX | -98% | 412 | 58% | 42% | 24% | 18% |
| Prudential | Feb98 | Jun06 | COH | 927% | ARBA | -99% | 762 | 65% | 58% | 23% | 35% |
| Punk Ziegel |
Jul98 | May06 | CCI | 696% | CTIC | -91% | 62 | 50% | 35% | 14% | 21% |
| RBC Capital Mkts |
Nov01 | Jun06 | CWTR | 851% | UPCS | -93% | 438 | 70% | 39% | 15% | 24% |
| Robert W. Baird |
Dec99 | May06 | WCC | 636% | VERT | -100% | 484 | 65% | 31% | -10% | 41% |
| Rodman and Renshaw |
Sep02 | May06 | JCOM | 307% | ALT | -95% | 82 | 41% | 0% | 58% | -58% |
| Roth Capital |
Mar00 | Jun06 | UHAL | 1489% | MBAY | -99% | 192 | 57% | 47% | -12% | 59% |
| Ryan Beck and Co |
Oct02 | May06 | ADSK | 480% | ALT | -96% | 136 | 69% | 30% | 66% | -36% |
| Sanders Morris Harris |
Mar03 | May06 | VLO | 550% | CPWM | -63% | 87 | 69% | 50% | 49% | 1% |
| Sandler O’Neill |
Nov04 | May06 | NDAQ | 172% | NPTE | -24% | 82 | 83% | 16% | 9% | 7% |
| Soleil | Dec05 | May06 | SPTN | 30% | WIND | -38% | 45 | 49% | -2% | 1% | -3% |
| Southwest Sec |
Jan99 | Jan06 | PNRA | 1146% | ARTG | -95% | 120 | 53% | 49% | 15% | 34% |
| Stanford | Nov04 | Jun06 | BMRN | 153% | SGTL | -81% | 119 | 67% | 13% | 10% | 3% |
| Stephens Inc. |
Mar98 | May06 | SWN | 1420% | ARBA | -99% | 212 | 66% | 66% | 20% | 46% |
| Stifel Nicolaus |
Mar00 | May06 | BTU | 966% | ELOY | -92% | 183 | 66% | 41% | -14% | 55% |
| Susquehanna Financial |
Nov04 | May06 | CHH | 117% | INCY | -39% | 104 | 48% | 6% | 10% | -4% |
| ThinkEquity | Apr03 | May06 | DNA | 365% | BPUR | -95% | 106 | 53% | 14% | 45% | -31% |
| Thomas Weisel |
Jun99 | Jun06 | CHS | 668% | RBAK | -100% | 492 | 51% | 9% | -4% | 13% |
| UBS | Jun03 | Jun06 | ARNA | 702% | DCN | -96% | 537 | 66% | 23% | 29% | -6% |
| WR Hambrecht |
Feb00 | May06 | MRVL | 468% | RBAK | -100% | 276 | 50% | 20% | -9% | 29% |
| Wachovia | Apr00 | May06 | URBN | 1016% | VITR | -96% | 501 | 65% | 31% | -12% | 43% |
| Wedbush Morgan |
Sep99 | May06 | URBN | 466% | DLK | -99% | 196 | 56% | 20% | -4% | 24% |
| William Blair |
Jul99 | May06 | JLL | 590% | JDSU | -96% | 234 | 56% | 20% | -3% | 23% |
According to this analysis (only currently available stocks on Nasdaq, NYSE and American), 70% of the analysts outperformed the S&P500 Index (SPX) over the time period of coverage, the recommendation with the largest return was Friedman Billings recommendation of NewMarket Corp (NEU <> 7053%), the analyst with the best average return (112%) and the best performance compared to the S&P500 (excess return 87%) was Investec, and the analyst with the best success rate was Sandler O’Neil (83%). Lazard Capital generated the worst average return (-3%) (Note: Lazard Capital’s time of coverage is very short), Rodman and Renshaw turned in the worst performance compared to the S&P500 Index (-58%) and CE Unterberg Towbin exhibited the worst success rate (38%).
Interestingly, almost all of the analysts recommended “dogs with fleas”, the average of the worst pick returns was -82% and the average analyst success rate was 60%, so unless the analyst has a few home runs to make up for the “dogs with fleas”, their results generally aren’t very good.
At PowerOptions, our patented search tools were developed to aid customers in generating consistent income with smaller wins, but also with fewer and smaller “dogs with fleas”.
[tags]stock market research, personal stock portfolio, stock research[/tags]