Reality Stock Ratings

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 These analysts seem to have lost a step because their tools are outdated.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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