What value forecasts?

What value forecasts

Written by James Weir

James specialises in the theory and best practice of portfolio construction and management. His success within national and international investment banks led him to become a Co-Founder of Steward Wealth and he is a regular columnist for the Australian Financial Review.
December 17, 2013

We have long been sceptical about the value that stock broking analysts add to our and our clients’ lives. The two charts below serve to reinforce that view.

The first table below comes from Barry Ritholtz’s blog The Big Picture. It lists the forecasts made at the beginning of the year by the fourteen biggest investment banks in the United States of where the S&P500 would be by the end of 2013.

forecasts1

The second chart was published by Deutsche Bank’s Australian equities strategist, Tim Barker, on 3 December. He analysed the returns from consensus analyst recommendations by grouping them into quintiles of popularity, rebalanced them each quarter and assessed their returns over successive years. The results are not flattering for analysts: whilst they did by and large get the sell recommendations right, the buy recommendations were the worst performing!

forecast2

This information is of a general nature only and nothing on this site should be taken as personal financial or investment advice, or a recommendation to buy or sell a particular product. You should also obtain a copy of and consider the Product Disclosure Statement before making any decision on a financial product. You should seek advice from Steward Wealth who can consider if the general advice is right for you.

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