It would be nice to have analyst ratings for stocks (i.e. buy/hold/sell) when looking at the Discover tab on the app
Statistically analysts are only good (I’m being nice by using that word) are predicting the next 12 months. They are utterly shocking at anything over a longer time period.
I for one would absolutely hate to see this data be made available within the app. It would simply fuel the short-term -ism that clogs up our capital markets.
As @ytsruh said, Wall St analysts are shocking at predicting the future.
Those who know what will happen in the future wouldn’t be sharing all the info so willingly. The Oracle of Omaha and his team do their own research. Plus, Wall St banks have conflicts of interests - don’t let the illusion of “the Wall” trick you into thinking front-office analysts act independently of dealmakers. Their research gets vetted and stuff get redacted before the public sees it. Independent research houses and short-seller researchers are different but you also never know.
I’d recommend doing own due diligence.
Or at least, try to get access to what the analysts have to say, not just what they “recommend”.
Note, the sell-side (banks, brokers) don’t actually recommend, they often phrase it as “we are overweight, underweight, neutral”. Each research report is followed by at least 1-2 pages of legal BS removing any responsibility from the firms. Brokers, for example, need volatility so their research is mostly likely biased. “Free” or paid research supports trading for their trading desks.
"The selection of stocks is more like rolling the dice than like playing poker.
Maybe in 2011 or 2012, Bloomberg once showed on TV during some segment that their research on stock recommendations by individual analysts shows that the vast majority or analysts get got 30 or maybe 40% of recommendations “correct” (lucky). The very few were quite good (60% or so).
That’s like monkeys throwing darts at the wall (<- someone’s quote).
We as humans inherently look around to see what’s acceptable behaviour. However, independent thinking is rare even when we think we make most decisions independently.
(Also, there have been experiments - and even live “mentalist” TV shows - that showed that people, only if acting independently of one another, can potentially predict a number or a price or whatever if you take their independent guesses and maybe average them out.)
Knowing a recommendation from a good analyst who knows his stuff can move the shares up or down. But we’ll be late for the game anyway because they send their recommendations to clients first.
I found this great chart - since Bloomberg wants to avoid angering its clients, they included it in an opinion piece:
Daniel Kahneman of Princeton University - one of the two godfathers of modern behavioural psychology/economics (along with his partner Amos Tversky) - wrote in Thinking Fast and Slow:
“There is general agreement among researchers that nearly all stock pickers, whether they know it or not – and few of them do – are playing a game of chance.”
“Closely following daily fluctuations is a losing proposition, because the pain of the frequent small losses exceeds the pleasure of the equally frequent small gains. Once a quarter is enough for individual investors. In addition to improving the emotional quality of life, the deliberate avoidance of exposure to short-term outcomes improves the quality of both decisions and outcomes.”
Motley Fool summarised it here:
Kahneman is skeptical about whether it’s possible for ordinary investors to beat the market. As an academic steeped in statistics and economics, he points to 50 years of research that shows "the selection of stocks is more like rolling the dice than like playing poker."
Obviously, many of us might disagree, and that’s fine. I still believe it’s important to consider his view on this issue, however. Anyone who truly thinks they can beat the market, should be able to provide evidence of that skill by objectively analyzing their returns over a long timeframe. System 1 thinking is quite good at allowing you to fool yourself into thinking you might be better at stock picking than you really are.
True however… if you simply go for high dividend returns and it is a basic FTSE 100 type company then you’re unlikely to be far wrong over an extended period, especially when compared to just leaving it in the bank no? Or am I one of the deluded ones?
@Dys Debenhams was a high-yield FTSE 100 company once
Absolutely agree. I avoid the retail sector as it is being destroyed by online… but point taken
If it was possible I would vote down this idea on the basis that it runs contrary to Freetrade’s values
I would go against this idea based on the fact that you can do independent research elsewhere and do I even trust the analysts when you see a stock with half strong sell and half strong buy opinions from the ‘pros’?
I’m also against this idea. It might drag Freetrade towards a scenario like Hargeves Lansdown and Woodford, and I think brokers should try to maintain independence from analysts so that customers do their own research and due diligence.
I’m unaware of HL’s dealings Gaz. Do they issue their own B/H/S ratings themselves? Fully agree on that point but I think OP means to show it from US firms like they have on Tipranks.
Same. Education yes but anything that comes remotely close to influencing stock selection should be avoided.
I’m not 100% as I don’t use their platform, but my understanding is that they had almost ‘promoted or featured’ funds in best buy tables that could appear to be an endorsement or recommendation to some investors. Unfortunately, a lot of these ‘recommended’ funds were Woodford’s funds, hence, a lot of customers have lost money.
I read most of the responses The idea wasn’t to influence buying, but to be available as a research tool, that’s all
Yes that’s all I heard about that. And they charge extorniate fees
The influence of preferential attachment among humans is strong. Very strong. Top brokers’ recommendations swing markets in the short-run. Call it FOMO or whatever, it’s in us, humans, because we are wired to be social. Also, we prefer simple explanations and maybe even shortcuts.
Peer-review based valuations are strongly affected by herd effects. Consequently, the first to voice their opinion often define the conversation and shape disproportionally the opinion of the later reviewers. This pattern affects the music that becomes popular, the products we buy, and even the approval of medical devices by the FDA. And once “expert” opinion is in, a rich-gets-richer phenomenon takes over, and propels the public’s opinion in a direction that may have little relationship to performance.