Your opinion on broker's reports?

[Steve C]

Hi everyone,

A question to our more experienced traders, what is your take on broker's reports? do they factor into your decision making process when looking for a stock to buy? why/ why not?

Also would a broker's report be an example of complete fundemental analysis?

Thank you for your time,

Steve

 

[skc]

Hi everyone,

A question to our more experienced traders, what is your take on broker's reports? do they factor into your decision making process when looking for a stock to buy? why/ why not?

Also would a broker's report be an example of complete fundemental analysis?

Thank you for your time,

Steve

Broker reports imho provide useful starting point for your research and decision making, but ultimately you need to scrutinise the report's figures, assumptions etc.

Typical reports are written as "If ABC happens, then EFG and the value of the share may be $XXX". It's up to you to test whether ABC will in fact happen (or the probability of such), whether the link between EFG and ABC is valid, and whether EFG will in fact lead to the company's value being $XXX. Then on top of all that, will the value of $XXX in fact lead to a corresponding share price...

One issue I have with broker report is that the discount rate used is too small to factor in uncertainty and generate an above average return imo.

The other issue with broker report is that, by the time you act on their sell recommendation it'd be already too late.

 

[springhill]

Broker reports imho provide useful starting point for your research and decision making, but ultimately you need to scrutinise the report's figures, assumptions etc.

Typical reports are written as "If ABC happens, then EFG and the value of the share may be $XXX". It's up to you to test whether ABC will in fact happen (or the probability of such), whether the link between EFG and ABC is valid, and whether EFG will in fact lead to the company's value being $XXX. Then on top of all that, will the value of $XXX in fact lead to a corresponding share price...

One issue I have with broker report is that the discount rate used is too small to factor in uncertainty and generate an above average return imo.

The other issue with broker report is that, by the time you act on their sell recommendation it'd be already too late.

+1

Broker reports are a good starting point, but beware of them pushing their own barrow. Always check their involvement in the company.

 

[Boggo]

The other issue with broker report is that, by the time you act on their sell recommendation it'd be already too late.

+1

Broker reports are a good starting point, but beware of them pushing their own barrow. Always check their involvement in the company.

+1

Below is a table showing analyst status on BBG a few weeks ago. Brokers are just the mouthpieces for their inhouse analysts.

Below that is the weekly chart. Learn to become your own analyst and not one of the sheep who are dependant on their (fundamental) out of date nonsense.

 

[Julia]

+1

Broker reports are a good starting point, but beware of them pushing their own barrow. Always check their involvement in the company.

+1. Or if they are acting primarily in the interests of a big client.

 

[pixel]

from an article I penned - years ago - on the topic, comparing the benefits of using a Full-Service Broker ("FSB") against self-study to become a competent and self-sufficient trader (t/a variety, in my case)

Given all this amount of self-education and years of studying, it's only natural that [we] feel just as well trained and capable as any analyst who is employed by a broking firm to look after their paying corporate clients. Fair question: "Given an equal amount of studies, mental capacity, and time spent on the job: what justifies the additional expense of asking an FSB?" If a conflict of interest came about between a big client offering a commission to sell, which FSB would ring his retail clients and suggest they sell as well? I've heard of claims to the contrary, but common sense (if not personal experience) would suggest otherwise.

There can be a good and valid reason for using services like rec sheets, stock analysis, or various other subscriptions: If I can't find the time, or lack the patience/ understanding/ nerve to do the analysis myself, I pay somebody that does have the time and knows how to use those tools.
As regards "special knowledge" and "little-known background information" - sure, some Analysts have done their homework and collected useful information, which they sell to paying customers. [...]

That aside, however, there is also an enormous amount of information freely available on the www. It takes time to research; it helps to have a "network" of similarly interested people you know and trust. We share (group) e-mails, and newly discovered sources are freely discussed in private chatrooms - not to be confused with daytrader playgrounds or ramper forums. Takes an open mind and more time than a phone call or reading a report; but the reward is, it cuts out the middleman's opinion and even a hint of a suggestion of a suspicion of maybe an ulterior motive...

full text - and more - at http://rettmer.com.au/TrinityHome/Trinity/Musings.htm#onFSB

 

[Klogg]

I generally don't use them until I've done my own preliminary research - then I take a look.

Generally I'll find that I've covered everything they have, but every now and then they point out something I missed, so I'll go and research further.

Never will I use their final 'recommendation' though, as I find too often a number of issues, like:
- They have their own vested interests (see some of Roger Montgomery's recommendations for an example)
- They're far too bullish on forecasts
- They use generic information provided by companies like MorningStar, rather than going through financials
- Quality of management is never taken into consideration
- Their timeframes are much shorter than mine

This is purely from a fundamental perspective - for technical analysis, Boggo, Tech/a and skc are knowledgable (and others, but these are the ones that come to mind)

 

[springhill]

It would make an interesting exercise if you took a selection of stocks, look at the brokers report from the date of release and saw how accurate their 12 month targets are, or if they are even in the ballpark. I think the results would tell you everything you need to know.

 

[JLM Financial]

Happy for anyone to look at an example of our recent report. Our firm specialises in macro derivatives, not individual stocks. Here is the link to the PDF.
http://jlmfinancial.com.au/wp-content/uploads/Trade-Idea-Sell-SPX-500-6-July-2012.pdf