You want something to worry about? How about analysts who throw in the towel because they have been so wrong, or because they are running out of patience to buy things.
Why do these worry me? Because if the stock market takes a downturn, which it will eventually, there will be no upgrade cushion to stabilize things -- because everyone's in the pool.
Let me give you some classic examples. Let's start with The Sherwin-Williams Company (SHW) , the paint company, which just had its analyst day where it talked about the success it is having with its purchase of rival Valspar Corporation (VAL) .
First, Wall Street had tremendous antipathy toward this deal, and the group in general, because of concerns about slowing housing and construction.
But the cake-taker in negativity was the Bank of America Merrill Lynch analyst who gave you the fabled double upgrade, the sell to buy, now, after the stock has rallied 40%. That's right, here's an analyst who fought this one all the way because of -- and I quote -- "concerns about high valuation, risks from the Valspar acquisition, potential peaking margin and expectation of slowing volume growth."
Mind you that, while the analyst admits the valuation remains elevated -- no kidding its up huge from his sell -- "we have turned constructive on the latter items." Wait a second, so the acquisition is now good, the margins aren't peaking and there is no slowing volume?
That's right. The rest of the double upgrade is a refutation of his own stance -- a towel throw. Sure there were the hurricanes that boosted demand. But this deal was always going to be positive because did anyone think if you merge two of the largest paint companies together there wouldn't be massive synergies, as well as a huge step toward cozy, oligopolistic pricing? I mean what was the point of the deal? This is a genuine towel throw of the "I can't take it anymore" variety.
Or how about the Microsoft Corp (MSFT) upgrade from Canaccord today, which discussed, "Beyond-the obvious case for Long Term acceleration-upgrade to buy." Yet, when I read the report, it was almost all written by Captain Obvious. The office productivity, the gaming, the marketing, the Azure cloud platform. The only thing that was left out was Satya Nadella's cool black t-shirt look.
How do I know that this is a towel-throw upgrade? Because the analyst tells you in this gem of a paragraph, beginning with: "Why Now?" Here's the answer: "we had hoped for a random correction in Microsoft shares or a correction in the overall stock market. Neither happened."
Another guy who simply could not take it anymore and had to slap the buy on because the market refuses to come down.
Why do I hate towel throws? Because they are value subtracted. Do I really want to hear NOW why I should buy Sherwin Williams, now when all of the good news is out?
Do I really care that someone puts a buy on Microsoft now because he's tired of waiting for something to drive the stock or the market down?
Why not just wait? You've waited this long? Either of the authors of these two pieces of research might have at least waited for a down day, after eight straight up days.
While I am not bearish, I will say that when you see this kind of research, you are not early into a move. You are late. Remember that, and remember when we do go down -- and we will -- none of these towel throwers will be able to have an impact upgrade. What a shame. And what a waste of some very valuable trees -- for nothing of value.