Reports by bank analysts

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Thegipper
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Reports by bank analysts

Post by Thegipper »

I have access to RBC analysts stock reports. Rarely do they ever issue a sell report. I have heard other experts say that analysts are reluctant to issue sell or negative reports. If they do the company will not give them access to management interviews and information. It would be good if there was some way to determine how successful an analysts using an objective standard. I do look at such reports in making stock choices. It is used to supplement my own research. Would appreciate what others say .
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Re: Reports by bank analysts

Post by Thegipper »

Sorry Mr Moderator could you merge this in with one of the other relevant topics on this matter.
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Re: Reports by bank analysts

Post by Peculiar_Investor »

Thegipper wrote:I have access to RBC analysts stock reports. Rarely do they ever issue a sell report. I have heard other experts say that analysts are reluctant to issue sell or negative reports.
Over my investing career I've had access to analyst reports from a number of full service and discount brokerages. IIRC there was some regulatory pushback a number of years ago because of the lack of sell reports. I believe that now brokerages are required to include some level of disclosure of the distribution of their ratings across each rating category.

Also remember that the reports you receive are from "sell side" analysts. Guess the purpose of their job?

I find analyst reports have some value in explaining the business, the drivers and the factors influencing outcomes. I put zero value on the recommendation and target price. Their crystal ball isn't any better than anyone else's.

Added: Found the regulatory requirement (I think). Rule 3400 - Research Restrictions and Disclosure Requirements | iiroc.ca
Rule 3400 Section 2(b) wrote:the Dealer Member’s system for rating investment opportunities and how each recommendation fits within the system and shall disclose on their websites or otherwise, quarterly, the percentage of its recommendations that fall into each category of their recommended terminology
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Re: Reports by bank analysts

Post by Arby »

Thegipper wrote:I have access to RBC analysts stock reports. Rarely do they ever issue a sell report.
If you scroll to near the end of the RBC report, they provide a distribution of their ratings, which says 6.46% of RBC ratings are Sell/Underperform.
Thegipper wrote:It would be good if there was some way to determine how successful an analysts using an objective standard.
Check out the Thompson Reuters Analyst Awards. Click on the map to select Canadian analysts. Thompson Reuters methodology says "Based on StarMine methodology, the Thomson Reuters Analyst Awards objectively measure the performance of analysts based on the returns of their buy/sell recommendations and the accuracy of their earnings estimates. "

I also look at analyst reports when making stock choices, as a supplement to my own research. I ignore the analyst's Buy/Sell/Hold recommendations, and focus on the text of the report and the earnings estimates.
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Re: Reports by bank analysts

Post by Lazy Ninja »

I enjoy reading the Argus company reports available at TDW for U.S. stocks. They can be fairly in-depth and informative. Those reports currently note that "The distribution of ratings across Argus' entire company universe is 47% Buy, 46% Hold, 6% Sell". I've also seen some enormous price revisions from those reports and others based on quarter to quarter developments. Probably best to just think of them as one of many tools in the toolbox.
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Re: Reports by bank analysts

Post by DenisD »

Wall Street Analysts Give Investors What They Want
Here are two models of sell-side equity research.

Model 1
•Sell-side analysts are in the business of finding out what stocks will go up and then telling you.

...

Model 2
•Sell-side analysts are in the business of helping institutional investors get access to corporate management teams.

...

If you believe that the job of a sell-side analyst is to tell people which stocks to buy and which ones to sell, you need to stop believing that right now, because it is not true.
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Re: Reports by bank analysts

Post by brad911 »

FWIW I never read any of them. From a business perspective they are a poorly constructed assessment of the investment prospects that a first year BBA student would author in a case study.
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Thegipper
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Re: Reports by bank analysts

Post by Thegipper »

I wish there was some way of comparing individual analyst's performance [the stocks that get a high buy recommendation] against the appropriate index benchmark. If they did one could better assess the quality of their reports.
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Re: Reports by bank analysts

Post by Peculiar_Investor »

But that's not an apples to apples comparison. An individual stock is only one part of a portfolio that could be compared to an index benchmark. Someone up topic mentioned using the StarMine methodology as a scorecard for analysts.
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Thegipper
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Re: Reports by bank analysts

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Peculiar_Investor wrote:But that's not an apples to apples comparison. An individual stock is only one part of a portfolio that could be compared to an index benchmark. Someone up topic mentioned using the StarMine methodology as a scorecard for analysts.
The analysts usually follower a number of stocks in particular sectors. For example some follow a basket of oil stocks or reits or other categories. One should be able to compare their performance against the appropriate benchmark. Analysts follow moe then a single stock.
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Re: Reports by bank analysts

Post by kcowan »

A change from buy to hold is the same as sell. But it is filled with politics so it is best to read the data and match it to your IPS. Do you remember all the analysts recommending buy and hold for Nortel all the way to the bottom?
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Re: Reports by bank analysts

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Why would you hold a stock you would not buy?

I have always felt that the decision to hold a stock is the same as the decision to buy a stock. If you would not buy a stock then why would you want to hold it.
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Re: Reports by bank analysts

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I buy a stock primarily for its dividend. I try to buy when the %yield is high relative to the historical record.
If its price goes up, it may become too "expensive" to buy. But it's still paying its dividend.
No reason to sell, unless the market offers me a comparable stock at a better price.
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Re: Reports by bank analysts

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deaddog wrote:Why would you hold a stock you would not buy?

I have always felt that the decision to hold a stock is the same as the decision to buy a stock. If you would not buy a stock then why would you want to hold it.
In the old days, when retail commissions were large, "hold" was a reasonable intermediate course of action when you thought a security was not too badly mispriced. Nowadays that is no longer true, but old habits die hard.

In my case, I don't pick individual securities any more except with my play money. There, the incentive for trading is pure speculation. "hold" does not play a role.

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Re: Reports by bank analysts

Post by DenisD »

ISTM, analysts, as a group, are used quite a bit by quant types. A lot of the ranking systems at P123 use analyst estimates or ratings. I think changes in estimates or ratings are more popular. For example, you might look for companies with estimated quarterly earnings increasing.
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Re: Reports by bank analysts

Post by SQRT »

They can be a very good source of information and background. I ignore ratings and target prices.
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Re: Reports by bank analysts

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pmj wrote:I buy a stock primarily for its dividend. I try to buy when the %yield is high relative to the historical record.
If its price goes up, it may become too "expensive" to buy. But it's still paying its dividend.
You would expect a too expensive stock to have a hold rating.
No reason to sell, unless the market offers me a comparable stock at a better price.
You would expect a comparable stock at a better price to have a buy rating.

If you would not buy it why would you hold it?
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Re: Reports by bank analysts

Post by Chuck »

As mentioned, one reason to hold is dividends (e.g. no plans to sell my TD shares yet I fell it's too expensive at the moment for me to buy more). Capital gains tax deferral plays into this as well.

Also, I admit I may not be as smart as I think I am. Sometimes it's better for me to just hold a stock for a decade (or two) than for me to always think I can sniff out a better bargain. OTOH, if I happen to have cash I wish to invest, might as well go with what I feel has the most upside at the time.
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Re: Reports by bank analysts

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The strategy of buying the worst performing bank seems to work, as per the following report by CIBC. I recently added Bank of Nova Scotia based on this strategy.
....Simply buying the worst performing bank stock the following year generates
incremental average annual return of 4.6% versus the bank index (see Exhibit 1). The
incidence of success is 56%, and 29% of the time the worst performing bank stock one
year is the best performing the following year. All in all, mean reversion has worked
for Canadian banks.
There are many reasons why one bank stock will periodically stray meaningfully from
the pack, resulting in different relative performance in the short term. However, over
the medium term, Canadian banks tend to trade comparably. Exhibit 2 shows
performance of a bank Mean Reversion Strategy that would rebalance quarterly and
would allow investors to capture the benefits in a relatively simplistic manner - likely
boosting the already strong results we have come to expect from the Canadian bank
index. ...
SQRT
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Re: Reports by bank analysts

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Arby wrote: 22 Jan 2019 09:50 The strategy of buying the worst performing bank seems to work, as per the following report by CIBC. I recently added Bank of Nova Scotia based on this strategy.
....Simply buying the worst performing bank stock the following year generates
incremental average annual return of 4.6% versus the bank index (see Exhibit 1). The
incidence of success is 56%, and 29% of the time the worst performing bank stock one
year is the best performing the following year. All in all, mean reversion has worked
for Canadian banks.
There are many reasons why one bank stock will periodically stray meaningfully from
the pack, resulting in different relative performance in the short term. However, over
the medium term, Canadian banks tend to trade comparably. Exhibit 2 shows
performance of a bank Mean Reversion Strategy that would rebalance quarterly and
would allow investors to capture the benefits in a relatively simplistic manner - likely
boosting the already strong results we have come to expect from the Canadian bank
index. ...
If you don’t mind selling and rebuying every year it seems to have worked somewhat. I guess it depends on how much they underperform one year versus how much they outperform the next. These strategies often work until they don’t in my view. BNS has underperformed for a few years so they are probably due for some outperformance. They very fact that this strategy is fairly well known, probably means it won’t work very well from this point on.
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Re: Reports by bank analysts

Post by Sensei »

Hi,

Interesting discussion. A few thoughts:

1. Reading: I read about one to two hours per day usually early morning (5:30 am) after market close Japan time and before the open 9 pm to 11:30 pm my time. If I have a particular stock in mind I read everything I can and probably more than two hours a day. In the case of some stocks, this process might take up to two years of carefully following a stock and waiting for the right price, or some event which might bring it to the right price for me.

Daily reading would include Argus, Morningstar, G&M, MSN, Dividend Channel, Contrarian Outlook, Zack's (whatever comes through my inbox) Motley Fool, Seeking Alpha, Investment Place, company reports (at least the balance sheet), any actionable daily reports by TDDI, and of course FWF. I also review each stock in my own portfolios of stocks daily, looking for unusual price movements. Also sometimes I fish through the portfolios of successful fund companies. Miller Howard comes to mind, among others. I also use FirstTrustNet to analyze offshore mutual funds of which I own about 10.

2. I consider myself to have a business owner mindset, so there are four reasons to hold a stock I wouldn't buy:
i. I bought the stock at an acceptable price to which it will, at worst, revert to. This seems to cover the 'burp' factor of a Mr. Market overvalued or undervalued market. I would sell if the fundamentals of company indicate either danger to the dividend or irreversible destruction of company value.
ii. The dividend stream remains acceptable or growing.
iii. I like the company and what they do.
iv. I don't want to book a capital gain. This may change later when I reach the decumulation stage. (dividends get reinvested for the time being)

I consider TDDI's two standard reports from Argus and Morningstar well worth reading as they offer independent analysis. I was a subscriber to Morningstar's Dividend Newsletter when it was run by Josh Peters. I consider Morningstar to be the cornerstone of the modest successes I've had in dividend investing. Recently, though, I prefer Argus reports.

Nobody has to do what I do, but I think it behooves regular posters to explain what they do so the the 100s of non-posting members can compare investing methodologies.
Cheers

"A dividend being paid today is always a positive return." Josh Peters, Morningstar
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Re: Reports by bank analysts

Post by DenisD »

Run screener and refresh stock screens every 6 months. Look for unusual price moves every week or so. That's it. In theory.
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Re: Reports by bank analysts

Post by SQRT »

@Sensei. You do a lot more than I do. I basically have just bought solid div payers and hold them. TD, RY, ENB, T, BCE, TRP, PPL,BNS, BMO, IPL indecreasing order of concentration.

Havent traded in over 3 years and may never trade again(I’m 68) if everything just keeps on keepin on. I am intimately aware and comfortable with the banks which are my biggest positions. Makes it easy for me. Would like to be more diversified but just can’t get there. Cheers.
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Re: Reports by bank analysts

Post by Sensei »

SQRT wrote: 23 Jan 2019 19:16 @Sensei. You do a lot more than I do. I basically have just bought solid div payers and hold them. TD, RY, ENB, T, BCE, TRP, PPL,BNS, BMO, IPL indecreasing order of concentration.

Havent traded in over 3 years and may never trade again(I’m 68) if everything just keeps on keepin on. I am intimately aware and comfortable with the banks which are my biggest positions. Makes it easy for me. Would like to be more diversified but just can’t get there. Cheers.
I hope that I will be able to say the same in 3 years when I am 68. However, I'm still in the accumulation stage, so need to do the research.

BTW, your portfolio looks like mine (less BMO and IPL) almost in that order, but + PWF, GWO, and MFC and some smaller positons.
Cheers

"A dividend being paid today is always a positive return." Josh Peters, Morningstar
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Re: Reports by bank analysts

Post by BRIAN5000 »

Sensei wrote: 23 Jan 2019 18:03 Hi,

Interesting discussion. A few thoughts:

1. Reading: I read about one to two hours per day usually early morning (5:30 am) after market close Japan time and before the open 9 pm to 11:30 pm my time. If I have a particular stock in mind I read everything I can and probably more than two hours a day. In the case of some stocks, this process might take up to two years of carefully following a stock and waiting for the right price, or some event which might bring it to the right price for me.
................



Nobody has to do what I do, but I think it behooves regular posters to explain what they do so the the 100s of non-posting members can compare investing methodologies.
Is all this work your doing providing any benefit other then maybe it's a hobby?? This article includes the cost of your time, breaks out an hourly wage for 8 hours of investment research a week compared to your salary with a break even rise in return. You need to get 1% more on 1 mil just to break even.



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