Investors and advisors use stock research to gain an understanding of a publicly traded company. Extensive examination of a company has been used for decades to serve investors in stock picking. But if using research reports for stocks is the right approach, then why isn’t it working better?
The most significant users of research reports is the investment industry itself. Investment Advisors routinely access research from multiple sources and use the research to form an opinion. Their opinion is the basis for a pitch to a client for a stock buy. But the problem is, it’s just an opinion and even if it’s good analysis, it doesn’t mean the stock buy is good timing. It’s essentially another form of speculation even though it is intended to avoid speculation. What matters in the stock market is timing and research reports rarely address stock behaviours and the market in general.
Almost all research reports are buy recommendations. It’s rare to find research describing why a stock is a sell. But if research was objective, there would be more stock coverage with a sell. Since 80% of all stocks fail to perform to the same degree as the top 20%, this should be the case, but it isn’t even close.
Advisors at large investment dealers satisfy the regulators by recommending stocks in big companies with research from their own firm. But does this work for investors? The research and the stock picks lack variety, objectivity and a thorough analysis of alternatives.
Research Reports Fail To Deliver
If investors want their portfolio to succeed, they’d be better off ignoring most research reports. Our studies have shown that the most significant fundamental measure in the stock market is earnings and sales growth. That information takes only minutes to determine and it’s free. Other fundamental measures have not proven to be significant enough to impact the stock screening process.
Since 2012, earnings and sales growth has been profoundly important for avoiding down trends in most stocks. But other indicators have been the key to picking stocks for outperformance.
Avoiding research reports helps investors maintain objectivity in order to target factors that matter in the management of a stock portfolio.
Unbiased independent market analysis for investors who want to know how to do better.