Have Analysts Gotten Honest?

It caught my attention when I heard an analyst on a popular financial news program tell investors to sell a stock because too many analysts liked the company, citing the fact that there is no sell ratings.

It seemed very logical to me that analysts should not tell investors 3M (MMM), which is one of the most consistent positive results records in the history of the exchanges has to sell. But the suspicion of conflicts of interest between brokers and analysts I decided to check it anyway. A bit of facts

While the stock is not at the time of writing had no sell ratings, there were quite a few hold ratings. Now I feel compelled to diverge here and say that the figure seems rather illogical than me. If a file is good enough to hold it's good enough to buy, and vice versa if you would not want to buy then you should not want to either stick to it.

As it turns out, the average analyst rating for 3M was only light and insignificant better than the average for all stocks in the Dow Jones Industrial Average, which the company is a part.

But what was most interesting about ratings on Dow components was that, despite the numerous and serious legal problems, AIG (AIG) was tied with General Electric (GE) and Du Pont (DD) for the third best rating, bested only by Citigroup (C) and Microsoft (MSFT). AIG was actually more highly recommended by analysts than JP Morgan Chase (JPM) and American Express (AXP).

This did not do much for my confidence in analyst ratings.

So I dug a little deeper look at the more statistically significant S & P 500. What I found was that companies in the index with the worst income has actually done more sell ratings than companies with the best performance.

At least analysts were with the sell rating, something they rarely did in the past.

However, there was a significant preference for the neutral "Hold" rating to commit to buying recommendations for all files indicates reluctance on the part of analysts and sell.

Mark Mahorney is a freelance financial writer for hire.

Mark Mahorney