Why do analysts publicly post their upgrades /downgrades ?

Discussion in 'Trading' started by Peter_Nellise, Jul 23, 2006.

  1. Why do analysts publicly post their upgrades /downgrades ?

    What is the point in disclosing such information for free to the public ?
  2. They have to

  3. To deceive you. When they say buy look to sell, when they say sell look to buy.
  4. The firms for which the analysts work upload this information (changes to rating or target price) to Bloomberg, First Call etc. The firms do this because they have a legal duty to let all their clients know of such changes simultaneously. Only letting certain investors know would be preferential disclosure - very naughty. Uploading to these information services is deemed to constitute simultaneous release. It also makes it easy for clients to access the information. Once this upload has happened the financial journalists will know very quickly, so you see a story on the wire saying "Mr. X at investment bank A has just upgraded Intel to a BUY". Maybe some firms do actually publicly announce this but even if they didn't, there's no way they can prevent it from becoming public information. So would they lose nothing by announcing, and perhaps gain some marketing benefits.

  5. I am sorry I dont quite understand the reasons behind this.

    Lets take an example: upgrade
    "CTXS Goldman Sachs From Neutral To Buy "

    The firm is Goldman Sachs tells everyone in the world that it is a good idea to buy the stock ??

    Sir, you said " The firms do this because they have a legal duty to let all their clients know of such changes simultaneously"

    Who are the clients in this case ?

    By the way Warren Buffet or William Browder would always say, that they never let anyone know what they want to buy or sell, which makes sense to me.
  6. Well, they are telling their clients. As I already pointed out, the firm can't really avoid making it public even though they may not announce it publicly themselves. The clients are the whole spectrum of investors e.g. pension fund managers, mutal funds, hedge funds and so on. The investment bank (in this case GS) is offering the advice and opinion of its research department to its clients. However, legally the firms must offer this advice to all of the simultaneously. That's why it's important that it gets the message out as widely as possible. Whether clients value this opinion or not and whether they act on it is a different matter. Incidentally, just because GS's research department puts a buy on stock, it doesn't mean that its asset management division or its traders will take a position in it. They are separate entities.

  7. u can take advantage of it; i traded tons of upgrades and some downgrades....if u are surgical rewards are pretty good since those stocks covered tend to attract attention and therefore to move....openin' range or after the first retracement is where i had the most success....upgrade--buy/downgrade--sell.
  8. For the sake of the thread originator, I will point out that it's precisely because traders can take advantage of it that the investment banks are required to tell everybody at the same time. Just imagine if the analyst told a couple of favourite clients that he was going to change his rating a couple of days beforehand. They could get positioned, make a ton of money. This is the reason investment banks use Bloomberg and other information disclosure services to announce the change in rating - everybody sees it at roughly the same time.

  9. New regulations require IBs to tell everyone at once. Reg FD I think?
  10. I don't know about new regulations but this has been industry practise for at least 4-5 years - the legal consequences of not doing it this way don't bear thinking about. :)

    #10     Jul 23, 2006