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A 'strong buy'

Analysing companies' finances and value from their financial statements using ratios and formulae
Paultry
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A 'strong buy'

#182306

Postby Paultry » November 22nd, 2018, 1:38 pm

I purchased 1,000 St Ives Group shares in April 2016. It is now Kin & Carta KCT

It was initially a very good yield, although too small as a HYP share, but it tanked and I just left them.

I've now had, or will have had on 24th Dec a total of £93.50 of dividends.

I was about to sell the shares for a net £20 profit, but I then noticed they are regarded as a strong buy.

I'm suspicious of selling them in case the 'strong buy' is indicative of something afoot in which they get taken over or become stellar performers.

Or, is my thinking complete and utter twaddle?

Paul

TheMotorcycleBoy
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Re: A 'strong buy'

#182460

Postby TheMotorcycleBoy » November 23rd, 2018, 8:47 am

Paultry wrote:but I then noticed they are regarded as a strong buy.

Hi Paul,

So, out of interest, where did you see the "strong buy" indication?

Matt

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Re: A 'strong buy'

#182473

Postby UncleEbenezer » November 23rd, 2018, 9:53 am

Strong Buy is some analyst's opinion. Could be right, could be spectacularly wrong. Popular shares will have many such opinions published on them, commonly some saying Strong Buy, others Strong Sell, with others somewhere between those extremes.

If the analyst has inside (non-public) information, they'd be limited in what they could publish. They're just taking a view on the company. If you want to investigate further you could try to identify the analyst(s) concerned and look at their track records. But I suspect that would be more work than doing your own research on the underlying share.

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Re: A 'strong buy'

#182475

Postby TheMotorcycleBoy » November 23rd, 2018, 10:19 am

UncleEbenezer wrote:Strong Buy is some analyst's opinion. Could be right, could be spectacularly wrong. Popular shares will have many such opinions published on them, commonly some saying Strong Buy, others Strong Sell, with others somewhere between those extremes.

That's right. I was trying to extract from Paul, which analyst's opinion he was referring.

And if the information was 1) free and 2) any good!

I'm a cheap skate, and the only source I've seen of such prophecies is from marketscreener (aka 4-traders)

e.g. one for Next Plc (NXT)

https://www.marketscreener.com/NEXT-9590100/consensus/

But I like to take their "information" which a big pinch of salt. First off, some stocks may only have one or two analysts contributing their ideas, and secondly their opinion could be out-of-date. Oh, and thirdly their opinion could be incorrect...

Matt

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Re: A 'strong buy'

#182478

Postby GeoffF100 » November 23rd, 2018, 10:27 am

You have to look at the "target price" too. It is no good if the share was a "strong buy" at a price much lower than the current price. Even so, does following these recommendations beat the market? You can be pretty sure that it does not, in the long run. There is no evidence that anyone can do that at all in risk adjusted terms, except by chance. If following publicly available broker recommendations beat the market, everyone would do it, and the recommended shares would immediately become over priced.

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Re: A 'strong buy'

#182512

Postby TheMotorcycleBoy » November 23rd, 2018, 12:14 pm

GeoffF100 wrote:You have to look at the "target price" too. It is no good if the share was a "strong buy" at a price much lower than the current price. Even so, does following these recommendations beat the market? You can be pretty sure that it does not, in the long run. There is no evidence that anyone can do that at all in risk adjusted terms, except by chance. If following publicly available broker recommendations beat the market, everyone would do it, and the recommended shares would immediately become over priced.

My beef with those "target" prices is how much they based on any notion of actual value of a share, and how much on a speculative trend that the analyst thinks the share price will follow, or that they want it to follow.

I recall that on 4-traders, the share price of Morrisons Supermarkets (I've forgotten the EPIC) was way more than the broker's consensus target price.....until suddenly, I assume, that the analysts decided they looked silly, and then changed their target prices!

Paultry
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Re: A 'strong buy'

#182528

Postby Paultry » November 23rd, 2018, 1:22 pm

TheMotorcycleBoy and all others,

The data was on Stockopedia, it's not free, and my subscription lapses tomorrow.

Three brokers have it as a strong buy and one as a buy. Their target price is 149p vs the 100p today.

I'm so glad that many of you have entered into a discussion and I rather think that all your replies confirm what I already know, that is, the price may go up, or down, or just sit tight.

My sinister side believes that broker recommendations are based on being more lucratively rewarded for positive recommendations, but I have no evidence for this belief whatsoever.

I'll let you know what I decide to do, but I am unsure of when. Paul

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Re: A 'strong buy'

#182530

Postby TheMotorcycleBoy » November 23rd, 2018, 1:41 pm

I tried a 2-week free trial of Stockopedia back in August of this year. It's certainly got of large amount of data both entered and calculated.

But I convinced myself to ignore their "recommendations" / "stock-style" guides. I did quiz them as to why Burford Capital was described as a "momentum trap".......they duly explained, but then they elaborated that if you select region=UK it did is/was a momentum trap, but if you choose region=US then it had a different stock style!!!

And since you can google free of charge for similar data, and similarly subjective forecasts, I determined not to continue with using the site.

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Re: A 'strong buy'

#182604

Postby GeoffF100 » November 23rd, 2018, 6:24 pm

Paultry wrote:My sinister side believes that broker recommendations are based on being more lucratively rewarded for positive recommendations, but I have no evidence for this belief whatsoever.l

I have seen it said that brokers tend to be optimistic because they are share salesmen.

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Re: A 'strong buy'

#182639

Postby gryffron » November 23rd, 2018, 11:37 pm

Paultry wrote:My sinister side believes that broker recommendations are based on being more lucratively rewarded for positive recommendations, but I have no evidence for this belief whatsoever.

Nothing sinister about it. It is obvious.
If they rate a share as buy, ALL their customers might potentially be tempted to trade.
If they rate a share as sell, only those customers who already own it can trade. A tiny proportion.

So clearly they stand to get more business from a buy recommendation than a sell.

Gryff

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Re: A 'strong buy'

#182640

Postby Dod101 » November 23rd, 2018, 11:49 pm

Paultry

If you are serious, the sums you write of are peanuts so why bother? Otherwise, any analyst is only as good as who is paying his salary. I might (in fact sometimes do) take notice of the IC comments but otherwise, forget them.

Dod

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Re: A 'strong buy'

#182641

Postby Lootman » November 24th, 2018, 12:10 am

gryffron wrote:
Paultry wrote:My sinister side believes that broker recommendations are based on being more lucratively rewarded for positive recommendations, but I have no evidence for this belief whatsoever.

Nothing sinister about it. It is obvious. If they rate a share as buy, ALL their customers might potentially be tempted to trade. If they rate a share as sell, only those customers who already own it can trade. A tiny proportion.

So clearly they stand to get more business from a buy recommendation than a sell.

There is another issue as well. Some brokers are part of a larger investment bank, like Barclays, Goldman or JPMorgan. They may do sell-side business with the company being assessed. Clearly those sell-side bankers may have more difficulty with a client if their buy-side analysts are panning it. So in practice there are always far more buy recommendations than sell recommendations. You are not going to get M&A or IPO business if your analysts are dishing out dirt on the same client.

In theory Chinese Walls keep the two sides separate, but in practice . . .

Analysts may also find themselves kept out of information flows if they are too nasty to a listed company, or negative in general.

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Re: A 'strong buy'

#182645

Postby UncleEbenezer » November 24th, 2018, 12:43 am

Lootman wrote:Analysts may also find themselves kept out of information flows if they are too nasty to a listed company, or negative in general.

Like journalists who ask Trump questions he doesn't want to answer?

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Re: A 'strong buy'

#182660

Postby TheMotorcycleBoy » November 24th, 2018, 8:37 am

Paultry wrote:TheMotorcycleBoy and all others,

The data was on Stockopedia, it's not free, and my subscription lapses tomorrow.

Three brokers have it as a strong buy and one as a buy. Their target price is 149p vs the 100p today.

I'm so glad that many of you have entered into a discussion and I rather think that all your replies confirm what I already know, that is, the price may go up, or down, or just sit tight.

My sinister side believes that broker recommendations are based on being more lucratively rewarded for positive recommendations, but I have no evidence for this belief whatsoever.

I'll let you know what I decide to do, but I am unsure of when. Paul

If I was you, I'd do some more research of your own, of the firm's outlook and profitability, and if you still really like them, then try to figure an approximate value per share. If all that seems favourable, then given that our markets are prone to various Brexit shocks and bounces, if you have the money you could just set up a pessimistic limit-buy-order (e.g a certain % less than their current price) and just see what happens.

Matt


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