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Why you should not rely on Broker opinions

Comments

  • #2
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    Brokers are not clairvoyant. Their reports are useful for background information and to get an idea of where a company stands competitively and its strategic plan's focus. Investors should always read the full report on a company and question the assumptions behind any stated buy, sell or hold rating as well as those behind any price target. Quite often the basis is purely X is trading at a PE ans/or PEG and/or yield discount to its comparators and we expect this to close over the next 12-18 months or it's trading at a discount to some historical measure. Investors should be prepared to question these lines of thought (is there a valid reason for the discount - eg. liquidity issues with the shares, management issues, a narrower product line, exposure to different markets or market segments) and use their own judgement as well as that of the professional.


  • #3
    soddy1979
    Registered Users, Registered Users 2 Posts: 284 ✭✭soddy1979


    SBWife wrote: »
    Brokers are not clairvoyant. Their reports are useful for background information and to get an idea of where a company stands competitively and it's strategic plans focus. Investors should always read the full report on a company and question the assumptions behind any stated buy, sell or hold rating as well as those behind any price target. Quite often the basis is purely X is trading at a PE ans/or PEG and/or yield discount to its comparators and we expect this to close over the next 12-18 months or it's trading at a discount to some historical measure. Investors should be prepared to question these lines of thought (is there a valid reason for the discount - eg. liquidity issues with the shares, management issues, a narrower product line, exposure to different markets or market segments) and use their own judgement as well as that of the professional.

    Well said.


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