brokers views

moneylover

How much importance should be attached to brokers views and are there some that are considered far more worth listening too than others?
For example I have been thinking about investing in Scottish and Southern Energy for the dividend and becuase I havent any investment in this sector. However when I looked at the brokers views there were 2 holds, one reduce, a sell from Goldman Sachs and an outperform from Exance BNB Paribas. Although I am attracted by dividend I dont want a share that is not likely to grow.

Then I looked at Pennon which has a lower yield (3.67% ) but which I have read several positive articles about recently especially Investors Chronicle which did a recent article about water shares
But low and behold Goldman Sachs has a sell on that today, re-iterated from Aug. There are, however two outperforms -HSBC and JP Morgan

How can there be such differences when the dates are very close together and there have been no particular company announcements?

BLB53

Personally, I do not attach too much importance to brokers comments - they tend to change with the prevailing wind.
If its dividends you are seeking, both SSE and Pennon have excellent long standing track records on delivering sustainable yields and imho both offer good value at current prices.
I hold SSE (for income) and Pennon is on my list to purchase when funds are available.

moneylover

BLB53 wrote: »

Personally, I do not attach too much importance to brokers comments - they tend to change with the prevailing wind.
.

But surely their job is to look at all the things about a company that we as individuals shouls theoretically do when deciding whether to invest? And do it better given they have subscription tools available and thats their full time job?

When newspapers such as FT tip what are they relying on - how much original research do they do?

And what about the Investors Chronicle - presumably the full length articles are pretty trustworthy although I wonder how much original research they do on all the rest?

zildjian

You have to beleive in the underlying company yourself, not what the broker says.

However, i have got SSE and their dividends are good.

BLB53

Brokers have a roll to play and they get very well paid to trot out their opinions, but those opinions are just that. Markets and individual shares are moved far more by investor/market sentiment (currently negative).
If you are investing for yield, obviously do your own research and look at fundamentals, but the important things for me are whether the dividends are likely to rise and are they sustainable. Both the companies you mention have a good track record over the past 10 years (at least) so the question to be asked is, I am happy with the current yield? If so, buy the shares.
Of course, the share prices will fluctuate over the months and years, but don't be too concerned because as long as the dividends keep increasing and growing your wealth slowly but surely, the share price is not really important. If the share price does increase, its just the icing on the cake.
Dividend investing is one of the best ways to grow and protect wealth over the longer term. If you dont need the income to live on, reinvest them for super-charged returns to your portfolio.

moneylover

yes thanks I agree with re investing dividends - not that its very easy. I am currentlywith X-O and you cannot re-invest dividends except as though making a new trade at full cost

So need to change. The only ones that allow this re-investment at a reduced price (almost pence) are Halifax and iii - if anyone knows of others I would like to hear!

IronWolf

I take absolutely no notice of them.

moneylover

IronWolf wrote: »

I take absolutely no notice of them.

so who does? Sometimes they seem to move prices other times they dont - so, as I said, are some brokers worth listening to and others not?
What is their target audience?
They all get reported on stockmarketwire etc

and to repeat the question - would you take notice of Investors Chronicle or Citywire to quote a couple of examples. I realise there are lots of excellent investors who entirely do there own due diligence but not everyone has the time or the intelligence to do this - it would be nearly full time job even if you specialised in just one sector

westy22

Brokers earn money by buying and selling therefore they like to create 'froth' to encourage churn - they earn whether you buy or sell, but not if you hold! The last thing they want to encourage is long term buy and hold (LTBH) investors.

Thrugelmir

moneylover wrote: »

How can there be such differences when the dates are very close together and there have been no particular company announcements?

Analysts specialise in industry sectors. So can form an opinion based on far more research and data than an ordinary shareholder. Will also receive regular briefings directly from the Management/Board.

Doesn't have to be Company specific information that causes a re-rating.

moneylover

thank you Thrugemuir - so it sounds as though though brokers reports can be quite relevant - I cannot, for example, go and quiz the management board!