What an American treasure these analysts. One has to wonder what their real agenda is when they change the rating of a stock. Maybe they simply have too much inventory and merely need to mix it up a bit and afford their trading desks with a couple of high volume days. It could be as simple as finding those stocks with a measurable short position and commence with the time favored short squeeze. Let’s not forget about the larger position clients that want to get out of a position and what a better way to put a big smile on your clients’ faces than to get them out with another 3 to 5% gain. This of course assures one of attending all the fancy holiday events.
Today, an analyst at Stifel Nicolous raised his rating on Capital One Financial (COF) to Buy from Hold and raised the earnings estimate for 2010 to $2.86 from $2.53. The analyst took out his crystal ball and justifies the rating change as the ball told him that “the worst of losses from loans is likely past”. Of course this “Ouija board” forecast comes on the heels of COF noting increases in delinquencies and write offs for the month of November and the CEO projecting flat business for 12 to 18 months.
It appears that during the summer months, many analysts work the carnival circuit in an effort to maximize the usage of their crystal balls. Summer months tend to be slow for the equity market and the carnival fortune telling and guessing someone’s weight affords the average analysts an opportunity to hone their skills for the fall equity season.
On April 14, 2009, Stifel Nicolous downgraded the stock to hold from by. The same day, the stock closed around $17.00. Yesterday, COF closed at $39.05 ($22 increase or 130%). WOW, what a scholar. The analyst could not justify anyone to taking on a new position under $20…just hold and now that it has more than doubled, it is time to open the flood gates for newbie’s to BUY so we can move inventory, squeeze shorts and enable our larger clients to smile.
I wonder if the analyst rating call agenda would be the same if their grandchild was sitting in their lap.