We know that Wall Street analysts always have a buy bias. It is really hard to get them to move to anything other than a buy recommendation except at market extremes. They have the belief that prices will always go up and there always is a reason for higher earnings or growth higher.
We should take note when the percentage of buy recommendations falls. Current buy recommendations have not only fallen but have reached market extremes. The relationship between buy recommendations and future market is not perfect, but when the consensus for buys is low the current optimism for higher stock prices is just not present. Low buy recommendations means that if there is an increase in buy recommendations, there will be new interest in the market and future prices will go higher. If you believe that analysts are affected by current bad information, a low number may be a good contra-indicator for where future prices are headed.
No comments:
Post a Comment