Broker upgrades and downgrades

J

jj_jere@hotmail

Does anybody play the stock of a major brokerage recomendation, such as Bear Sterns, when they upgrade or downgrade such security?
Seems they can really move the stock for a short time after such a change. Do the institutions really use brokerage recomendations?
jj
 
JJ, In my opinion this is a very risky game to play unless your own analysis gives you a decent entry point. Often times both listed and unlisted stocks get marked way up on the upgrade or way down on the downgrade. As buyers and sellers flock in or out, the price jerks back. Another version of this is the earnings play, where the same thing happens. Company A posts bad earnings and boom their stock shoots up 3 points. Company B Posts great earnings and they drop 3 points.

There are a few sites, and if I could remember them that rate analysts and their recommendations. You may want to see who this years movers are and follow what they say for a while.

One final thought on this is stocks move in groups with a fairly high correlation. For instance good news for CSCO is good news for PMCS and vise versa.

Regards,
 
It depends on the timeframe. For daytraders, anything that triggers a big gap opening creates opportunity. For an institutional investor, my impression is that some analysts carry quite a bit of weight. Most institutions at least pretend to trade on fundamentals, so an analyst report that highlighted a material change in fundamentals would certainly get their attention. I think for the individual investor or swing trader, you shouldn't try to jump on a rec because you will be late. Probably a good idea to ditch a stock that gets a downgrade though.
 
I think of brokerage recommendations as noise that needs to be filtered out. Listening to it will distract you from ferreting out the things that are really important. Don't waste your time. The brokerages have their own agenda and it is not the same as yours.
 
Here is one site that rates analysts (BulldogResearch.com) the other is something along the lines of Vadelia.Com, but I could not find the link so they may have gone the way of Pets.com.

Regards
 
JJ
I tried the link directly from a Yahoo search and could not get it to come up. Not sure if this is another site that went bye-bye. I did a few searches under "analyst rankings/ratings" and you do get a lot of hits, but most are pay sites. Sorry I could not be of more help.

One parting thought is there used to be a mag called Online Investor. They had about 10 pages of various investing websites with some commentary about each. You may find a copy at a Borders, but I am just not sure.

Regards,
 
I frequently read posts on this board that refer to trading on news, upgrades, etc, and I'd like to know if anybody can make money consistently by trading based on news. The way I was trained, we were told to ignore news, or at the very most, allow news to confirm a trade, never to allow news to determine a trade. On the infrequent occasions that I have failed to follow that advice, I have almost without exception gotten hurt. I don't think I'll ever make news a part of my trading strategy, but I am curious as to whether there are those who can guess (prognosticate??) the effects of news on price consistently. As a former broker (5 yrs on the schlockhouse circuit), I have developed a deep sense of skepticism about the motivations behind analyst upgrades. I always wonder if they really think the stock will go up, or if they just want the stock to go up.
 
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