To be successful as an investor, you have to know which type of sources you can trust.
It’s also helpful, to not let recent past performance color your predictions of where the best future returns will arise. In a recent article on Bloomberg.com, you see examples of how treacherous the consequences of relying on large brokerage house research can be.
Anyone who did what Wall Street analysts advised last March has only losses after the biggest stock market rally in seven decades.
Citigroup Inc., Bank of America Corp. and more than a dozen other firms told clients to purchase European energy producers and U.S. drugmakers while selling banks and retailers, according to combined rankings compiled by Bloomberg. An investor who used $10,000 to buy companies in the highest-rated industries and bet on declines in the lowest since the advance began on March 9 lost everything and would owe as much as $6,000 to cover bearish trades, the data show…
The lack of forward thinking by brokerage house research departments has been a constant theme in our research meetings over the years. In fact, a central premise of our research process challenges us to explore the reasons why a source may be recommending a specific area of the market.
We attempt to evaluate the lens through which a source views the investing landscape. This can help us understand whether they have a motivation and/or bias that skews their opinion. Digging deeper allows us to zero in on the “why”, which goes a long way in helping us identify opportunities for better returns.
