Analysts' accuracy in predicting US profits dropped to the lowest level in at least 16 years last quarter, adding to a worsening track record since regulators forced companies to stop leaking information to Wall Street.
Earnings estimates from analysts matched results for 6.7 per cent of companies in the Standard & Poor's 500 Index that reported second-quarter profit, the fewest since Bloomberg began compiling the data in 1992.
Accuracy peaked at 30 per cent in the fourth quarter of 2000, the year Regulation Fair Disclosure, known as Reg FD, was adopted, and has fallen for six of the seven years since.
'They're winging it,' said John Kornitzer, who oversees US$5 billion as chief investment officer of Kornitzer Capital Management in Shawnee Mission, Kansas. 'They can't find out the stuff they want to find out, and they've got so much to do because there have been so many cuts.'
The Securities and Exchange Commission's (SEC) law stripped analysts of their edge in forecasting earnings by making companies release information that affects profits to the public. More than US$500 billion of bank losses from the collapse of the sub-prime mortgage market has made predicting company results even harder.
Morgan Keegan's Mr Wilson, who uses technical and quantitative analysis to make investment decisions, says investors can't rely only on analyst reports because 'nobody knows right now how bad it could be' as the US economy slows and banks' credit losses continue to climb.
'You've got to do lots of other things beside read an analyst report and take an earnings estimate at face value,' he said. 'Schmoozing the company doesn't help any more.' - Bloomberg
0 comments
Post a Comment