You'd be better off doing the opposite of broker's recs.

EdGasket

So says this analysis by A J Bell:

https://www.youinvest.co.uk/articles/investmentarticles/105550/do-brokers-pick-winners?utm_source=Weekly+insight+150117&utm_medium=email&utm_campaign=Weekly+insight+150117&utm_term=Do+brokers+pick+the+winners%3f&utm_content=61009&gator_td=U9L5mWDYCNvmIrszOTK6ICuGmJ3drOemqomxHSphgeoJKfQQmp8b2eYhVkCGtMZTmb%2fhROK8UcKHRBBNqzMIuQUWAGwI3vo0FcMhENCfP1OL8Wr1jRH%2bOAeHz0qNx47ujIPIiwFsuSU%2bgoqD5VKll%2bdIDVyIlFuu6Tpg41HovEbJauhOYbehtJRHfWNloXuQ

Makes you wonder why they get paid so much??

dunstonh

So, a self service provider slags off brokers making long term recommendations on the basis on a handful of short term figures? (some of which later go on to be much better performers)

Strange that they do not show how their DIY clients picking shares fared compared to the stockbrokers. If it was better, you would expect them to mention it.

Personally, I do not have much faith in stock broker share recommendations as by the time they make the media, the period the broker may have been recommending them has often gone. Its too late.

EdGasket

dunstonh wrote: »

Personally, I do not have much faith in stock broker share recommendations as by the time they make the media, the period the broker may have been recommending them has often gone. Its too late.

Sorry I don't follow that last bit at all.
Broker recs are released to the stockmarket in real time and to the public at the same point by RNS, and are generally meant to indicate where they think the stock will be in the next 6 to 12 months. Therefore Bell's analysis is absolutely valid as they are looking at 1 year performance against the broker recs prior to that year,

BananaRepublic

EdGasket wrote: »

Makes you wonder why they get paid so much??

Because they can get away with it. It would be interesting to analyse data from individual brokers, and see if there is much variation. I am of the view that a lot of the financial world is smoke and mirrors, with nice shiny marketing bumf.

EdGasket

Part of the problem might be the house broker recommending the shares of the companies that use them. I have seen this many times; they give an unrealistically optimistic target for shares in which they have an interest. The bigger brokers e.g. Goldman's, JP Morgan are generally better than the smaller ones e.g Panmure, Shore Capital, as one might expect.

Malthusian

dunstonh wrote: »

So, a self service provider slags off brokers making long term recommendations on the basis on a handful of short term figures?

Long term my foot. How often do broker recommendations on a particular share change within five years? If they were long term the answer would be hardly ever - it shouldn't matter if there is a loss of confidence or a bad year because the analyst in his wisdom and foresight would have taken it into account and the assumptions behind his price target would still stand. The reality is that broker recommendations are a function of backward-looking market data and change constantly in line with it. They are noise. Share tipsters are about as useful as racehorse tipsters.

I don't know if in reality going against broker recommendations would make you better off as the thread title suggests. Despite their limitations you would still lose a lot of money by buying shares that were on the way to bankruptcy or otherwise obviously crap. I suspect that both following broker recommendations and going against broker recommendations would underperform the market in the long term.

However there is no easy way to test my hunch because neither brokers nor share dealing sites keep an archive of historic broker recommendations (to the best of my knowledge), they only show the current ones. Quelle surprise.

Malthusian

An early paragraph in the AJ Bell article to me says it all about broker recommendations - "primarily intended for institutional investors". Not because tipsters somehow help institutional investors to make better decisions with their billions of pounds under management. But because they help the institutional manager to keep his job when he makes a bad decision. "I researched this share and thought it was undervalued" = my fault. "Goldman Sachs researched this share and recommended it as a buy" = Goldman Sachs' fault. Everyone else was recommending this share, how was I to know.

They do not serve any purpose for DIY investors who are accountable only to themselves and are not going to sack their investment manager.

EdGasket

This site has broker recs going back a year or more e.g. see this example for tesco and the 'Broker Views' tab:

http://www.nandp.co.uk/sharedealing/company/?companyCode=TSCO

Ref. "They do not serve any purpose for DIY investors"; not quite true because share prices can move as a result of a new broker rec. and therefore the DIY investor needs to be aware of what the brokers are saying but not necessarily follow their recommendation.

coastline

This site is free to join for the basics..
Detailed figures are given in chart form such as Sales EPS Target Price Upgrades etc..
If you load up a price chart and compare brokers details again it then you can see how valuable this information is..
Simply looking at consensus such as Buy Sell Hold won't really give an accurate picture..
I've picked out three shares at random and you need to look at the Chart Consensus and Revisions tabs..

http://www.4-traders.com/BARCLAYS-PLC-9583556/

http://www.4-traders.com/ANGLO-AMERICAN-PLC-4007113/

http://www.4-traders.com/NEXT-PLC-9590100/

EdGasket

So for instance brokers were very bullish on Barclays at 280p and became less so as the price declined. Clever boys. Kind of prooves the point made by A J Bell.

steampowered

I found the article quite interesting. For those that don't want to read the whole thing, the article's conclusions are as follows:

"On the face of it, doing the opposite to the consensus/majority broker view served investors better overall in 2015 and 2016, to show the dangers of following the herd.

That said, the most intensively covered names with the highest percentage of ‘buys’ did do well, to suggest the trend can be investors’ friend.

The temptation to simply blindly do the opposite to the consensus should therefore be resisted, because the past is no guide to the future and because if making money in the markets was simple every one would already be doing it.

The data above is based on two individual years. Yet the real power of equity investing (which comes particularly through the harvesting and reinvestment of dividends) is felt over periods of a decade, two decades or more. What the data does seem to show is the well-informed, diligent, expert broking community has little more idea of what is coming than anyone else, at least in the short term. And if they haven’t got a clue when it comes to trying to time the market, it does suggest that private investors should only try it if they are only too aware of the dangers and are willing to suffer and able to financial withstand losses in their quest for momentum-fuelled portfolio gains."