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Reality Stock Ratings

Phil Harvey

6:30 AM -- Investors are panicked. They're looking for more guidance than ever before, and that makes the charmed life of a stock analyst a little bit tougher.

Long gone are the days when the analyst could get by with upgrading a few Internet stocks in the morning, and spending the balance of the day on TV chat shows proclaiming that bricks-and-mortar establishments are not long for this world.

It turns out, the analysts who did that were right. The bricks-and-mortar establishments -- mostly those owned by the clients of analysts who went all-in on Internet stocks -- did disappear in great numbers, as predicted.

Now stock analysts have it really tough. The markets are swinging so wildly, so quickly, that stock analysts -- judging by their stock ratings and price targets -- don't seem to be keeping up.

How can a stock that's a Buy at $15 still be a Buy at $8? And what is the difference between Buy and Accumulate? Don't you end up owning shares in both cases?

I think some of this could be the fault of poor stock rating systems. These analysts seem to have lost a step because their tools are outdated. For instance, what good is it to know if a stock will Outperform the market, when the market itself is acting like a chicken on cocaine?

I think a less rigid, more conversational, rating system is in order and I've made one up on the spot, as you'll see below:

Table 1: Reality Stock Ratings

Company Analysts' Consensus Recommendation* Analysts' Consensus Price Target* Philter Recommendation** Philter Price Target**
Alcatel-Lucent Hold � 2.50 Hold (Onto Your Backside With Both Hands). 2.5 Croissants
Ciena Hold $8.50 Drink. A Lot. Then Sell. Somewhere between $0 and $145
Nortel Hold $1.70 Sell. Then Move. Then Fake an Accent and Pretend You're Someone Else Entirely. ($5.71)
Tellabs Outperform $4.84 Buy. Then Hold. But Sell Before The Market Closes. Somewhere between $0 and $150

* Reuters
** Vodka

While my rating system has many flaws, I think it comes a little closer to making sense at a time when very few people can afford chicken or cocaine.

— Phil Harvey, Editor, Light Reading

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12/5/2012 | 3:25:05 PM
re: Reality Stock Ratings
Is the Nortel price in USD or CDN? Oh, I guess it doesn't really make a difference anymore.

12/5/2012 | 3:25:05 PM
re: Reality Stock Ratings

Either the dart throwing or chicken pecking method of stock picking? $150 for Ciena and Tellabs? Really? Can we get them to $15?

12/5/2012 | 3:25:00 PM
re: Reality Stock Ratings
It's just a range. They won't go below zero and they won't go higher than $150. Of that much, I am confident.


Well, a little bit.

12/5/2012 | 3:25:00 PM
re: Reality Stock Ratings
I used negative US dollars as opposed to negative Canadian dollars. Very silly of me, eh?
12/5/2012 | 3:25:00 PM
re: Reality Stock Ratings
While my rating system has many flaws, I think it comes a little closer to making sense at a time when very few people can afford chicken or cocaine.

I disagree 100%. Your stock rating system is better than every other system I've seen to date.

And with a mere four stocks covered you have already set yourself many strides ahead of every other goddamned analyst I've ever met. Unfortunately, that isn't much of a compliment, but you get the point.

I recommend you start the Chicken and Cocaine Hedge Fund. Explain to your prospective investors about how you hedge necessities against desireables, much like chicken against cocaine.

It will also telegraph the menu for dinner @ the annual meeting. Count me in for your initial raise.
12/5/2012 | 3:24:59 PM
re: Reality Stock Ratings
re: "Your stock rating system is better than every other system I've seen to date."

I wouldn't say it's better. But it is certainly more wordy and, as an English major, I think that qualifies as progress.

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