Broker research: Hot or not
Independent Financial Research
Broker research: Hot or not. A client calls his broker and asks what he thinks of stock XYZ. The broker replies, 'are you buying or selling'. It's an old gag that makes a useful point: As long as the client is buying or selling and not holding, brokers are happy. The subtle purpose of broker research supports this intention. It isn't designed to identify long-term value because brokers want you to trade, now. This difference in time horizon is part of the reason why broking analysts and long-term investors often have conflicting recommendations on the same stock. Because broking analysts don't have the luxury of time, they try to guess where the price might be in 12 months - the price target - with a focus on 'catalysts' that might get the price moving. They'll then justify the price target with an alarmingly precise valuation. (VIEW LINK)
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