Brokers Trade Lower on Citi Call; Really??

A Citigroup analyst is making news today for cutting estimates on the brokerages.  The headline from CNN reads, "Citigroup Issues Dour View On Brokerages' Q3; Shares Fall."  The firm lowered estimates on Morgan Stanley, Goldman and Lehman, and maintained estimates for Merrill.  The first thing we do when an analyst makes changes to his or her recommendations on stocks is look at their history to find out if we should really care.  Based on Citi's past calls on these firms, it's clear that we shouldn't.

Below we highlight the Citi analyst's historical calls on Lehman, Morgan, Merrill and Goldman.  As shown, the analyst has had a Buy rating on Merrill and Morgan since January 2006, reiterating it multiple times since then.  Citi had a Hold rating on Lehman from '06 until March '08, but then upgraded it to Buy on March 28th at $38.  The only stock that Citi has had a consistent Hold rating on since 2006 is Goldman, which has held up the best of all four stocks.

The fact that these stocks are trading down on calls from an analyst with the track record shown below shows how jittery investors are and how much of a pure trading environment this is.

Comments

[al]

Great analysis BIG. Citi should analyze itself first, NO FIX ITSELF, and then forecast projections on the rest of the industry.

This reminds me of dogs-- each smelling each others scent and then peeing in the exact same place !!!1

[danny]

very interesting -- you guys should do this type of thing weekly (put a sell sider under the spotlight)

Also, although not directly related, there is an awesome "buy vs sell side analysts" Harvard research paper on the CFA Institute website (basically says buy side analysts are WORSE stock pickers than sell siders)

Link is:

http://www.cfapubs.org/doi/pdfplus/10.2469/faj.v64.n4.3