Whenever anyone asks me why I don’t run more Bullish commentaries, I give them a three part answer — a) one the time is right, I will; 2) last time I was very Bullish no one wanted to hear it (October 2002 and May 2003).
And, iii) pretty much the rest of Wall Street — and a large swath of the financial press — do that already.
Look no further than today’s WSJ for signs that the bias towards "Buy recommendations" – long seen as sign of Research cowtowing to iBanking — is still rife on Wall Street.
"The froth is back. After the brokerage scandals involving biased analyst recommendations in the 1990s, Wall Street was supposed to start warning more often about stocks that could fall, rather than just giving upbeat views. But Mike Mayo, who covers bank and brokerage stocks at Prudential Financial Inc.’s Prudential Equity Group, thinks the research reforms of 2003 haven’t fundamentally changed Wall Street’s bullish bias.
In an article prepared for the May-June issue of CFA magazine, Mr. Mayo notes that Wall Street analysts have 193 "buy" recommendations on the 10 U.S. stocks with the largest market values. And how many sells? Just six.
One source of "systemic bias," Mr. Mayo writes, is "the threat from covered companies to punish analysts with negative opinions by shutting off their access to management." (emphasis added).
Note that Pru does not do any investment banking, and is freer than their competitors to address this . . .
UPDATE: May 7, 2006 6:08am
To be fair, picking only the 10 largest names is not a complete analysis.
I’d like to see the breakdown for the 100 largest names (and hence,
the most banking business), then the S&P 500, and then the next 2000
names or so . . .
Analysts Retain a Bullish Bias, Issue Precious Few ‘Sell’ Ratings
WSJ, May 6, 2006; Page B3