Investment and other “Wall Street” firms employ analysts, people who do research into individual companies to try to find those that are likely to be superior investments.

The heyday of analysts ended about ten years ago when it became clear that their predictions about specific company growth, sales, profits, competitive advantage, managerial skill, long-term vision were pretty inaccurate and not really much of a guide to superior returns. So there are now a lot fewer analysts but they still gets lots of media attention because of round-the-clock financial news, but their salaries are no longer stratospheric. No more super-famous “stars.”

There were and are still some fundamental problems with analysts. On the “sell side” (these are analysts whose research is sold to investors), most of their recommendations are “buy” or “hold,”, very few are “sell” or do nothing. Sounds a bit fishy when everyone knows lots of shares decline in price. Some analysts were influenced by the companies they follow to give undeserved high buy recommendations. Not quite kosher, eh?

Analyst predictions are accurate far less than 50% of the time. What are analysts good for? Not their opinions or price, sales and earnings projections. Not even when so many follow a company that there seems to be a consensus. Apple recently had thirty-two analysts following them. Hard to imagine that any one of them was uniquely perceptive.

Years ago, analysts had no specific expertise in the industries they followed. Now Wall Street is full of analysts with PhD’s in everything. Results? Not much better.

It used to be that research, information and access to senior management were limited, privileged and proprietary and only analysts went to private company presentations at expensive clubs or restaurants. Laws and the internet have changed all that to equalize the playing field. Those presentations and lots more information are available to you on the company’s website live. Want to listen to chairman’s speech? Go right ahead. Usually the questions after are much more interesting.

What are analysts good for? Just for collecting the simple facts, that’s all. Stock pickers still have to make their own specific buy or sell decisions — which as we’ve said a thousand thousand times — are not usually all that sound, profitable, visionary.

John Loeb a famous investor, said of analysts
In bull markets who needs them.
In bear markets who wants them.

So if you’re picking stocks, do your own analysis.
Better still, don’t.

PS: Confession. I started in Wall Street as analyst and as an MD with an MBA and a background in math and physics I first specialized in medical stocks like pacemakers, artificial hearts, biotechnology. In fact, I was the first MD on Wall Street. Wheeeee! Now they’re all over the place. I did it for two years, then went into investment banking and venture capital looking at a wider range of business. Much happier.