Analysts / Mutual Funds

[Uccmal]

I have never worked in the mutual fund industry or the I-bank industry or with equity analysts.  For those who have could you give me some colour as to their level of specific company knowledge:

i) Do analysts in general actually read AR and QR documents?

ii) Do the same analysts understand what they are reading?

 

What are your experiences?

 

This comes about after listening to the SSW call, and reading about the comments for the FBK analyst questions.

 

This is probably rhetorical in nature but I am still interested in commentary.

[SharperDingaan]

 

Analysts are under pressure to get a flash report out, & get their name on the conference call record. AR & QR docs are scanned, numbers are cherry picked & dropped into models - if it doesn't 'fit' the model it doesn't get plugged in. (FBK 10M/yr wood-chip future woodchip saving). The result is volatile trading & shallow questions on earnings day.

 

A more detailed report, & a clear recommendation, is expected within 2 days. Initially property of the favoured few, then spun out to broader & broader audiences. Recommendations become part of the analysts track record. The result is typically a price rise that plateaus at a level sustained by the broadening buying.

 

Manipulation is part of the business. Bad-mouth on earnings day to drop the price, buy in inventory, & make your recommendation look better. Report distribution is essentially market skimming via premium, market, & discount pricing.

 

Play the game or you're fired.

 

SD