The Analysts Are Afraid

 | Mar 12, 2013 | 11:02 AM EDT  | Comments
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Just not seeing a lot of value added from the analyst community right now.

Was the Jefferies smackdown of Apple (AAPL), with the $420 target saying that the company could miss the numbers, real added value? I mean the stock's been pretty well hammered back to where perhaps the downgraders should be upgrading and the price target cuts seem a little like follow-ons to stocks that have already been vaporized. Could have used a price target cut when it was at $500 or $600 or $700, but in the $430s, I can't say that's a real help.

Or how about the Sherwin-Williams (SHW) upgrade to Hold from Sell that we got from Credit Suisse today. Talk about fighting the rally. The firm placed a Sell on the stock since Jan. 11. IT's gained 100% since then as the housing juggernaut just didn't stop.

Is this the time to dump Radio Shack (RSH) if you have held it for a long time? Goldman seems to think so, taking this $3 stock to a Sell from a Hold. Is this really the level to eliminate the stock from your portfolio as a Sell implies. Admittedly, my last experience at a Shack when a salesperson discouraged me from shopping there, was quite a stunner. But at $3, do you mind if I hold on for better prices?

Goldman at the same time decides it's time to buy Best Buy (BBY). Gee, the stock's up 71% for the year and it is only March. Is the turn that big? Is there that much more room for the hardgoods purveyor to rock higher? Wouldn't a better time have been when the company first reported a better-than-expected quarter a few weeks ago? Doesn't this one feel like, "it's rallying, I want to be on board?"

Or how about the neutral commentary by the analysts on what, to me, looks like the beginning of a turn at Yum! Brands (YUM), the owner of KFC, given the much-better-than-expected number in China, the locus of the weakness.

Many of these same analysts defending YUM in the low $70s and high $60s when this food safety crisis first broke out then had to downgrade it at $66 to $63 as they realized the severity of the problem and what happens when you have down-40% comparable store numbers, an astoundingly dismal figure. They all seemed to be caught flat footed here, perhaps because they believed the subdued guidance of YUM's terrific CEO David Novak, who told everyone he could turn the ship around and gave specific instances of when bad numbers had been righted.

Or how about the 14 out of 24 analysts who cover Life Technologies (LIFE), a company that might be the subject of multiple bidders and yet they have a Sell or Hold on it. How could Danaher (DHR) and Thermo-Fisher (TMO) both be interested in it because of the tools it provides to more than 70,000 clients, including pretty much every biotech firm, if it were doing so badly? I just don't get it.

To me, the analysts have been totally out of sync with this market. They tend to have one foot out the door at all times and when they do step in, it's when the stocks have already gone up. Like the Best Buy analysts, I suspect that the YUM analysts won't begin to upgrade until it is palpable that the turn is at hand instead of getting ahead of the turn. Or they simply don't believe, as you have to admit anyone who has been telling you to sell Sherwin-Williams the whole way up doesn't comprehend the masterful turn in housing.

Here's what I see happening with many of these. The analysts are afraid. They don't want to miss a big up move when they actually probably have already missed it. They don't want to get caught telling you to buy a stock when it probably has come down enough to buy,

To me it isn't value added. It's value subtracted and I would pay attention to it at your own peril.

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