Bloggers Far More Accurate on Apple Than Analysts

Research has certainly come a long way…

Fortune magazine wrote a great article Wednesday comparing the efficacy and accuracy of Wall Street research houses that follow Apple (AAPL) and unpaid bloggers doing the same thing. This stems from a gauntlet-style challenge being tossed from the Bloggers to the Pros in the last few days leading up to AAPL’s fourth quarter earnings call.

The table below shows the results, and the full article is here… 

[click to enlarge]

Needless to say, the Bloggers kicked the crap out of the “Pros” (and I use that term lightly). The dark green boxes show where the ratings were closest to the actual numbers, and the orange boxes show where they are furthest. The Bloggers clearly won and there are a couple of cases where the “Pros” numbers were so far off, they look like they were following RIMM instead.

But I caution those reading this article to save it for posterity. The reality is that Wall Street analysts have the ability to retroactively change their ratings and earnings estimates. We have written on this topic before, and we will again in the future, but for now, here is a portion of an abstract that explains the phenomenon…

From: Rewriting History, by Alexander Ljungqvist , Christopher J. Malloy, and Felicia C. Marston; April 16, 2008:

Abstract:
We document widespread ex post changes to the historical contents of the I/B/E/S analyst stock recommendations database. Across a sequence of seven downloads of the entire I/B/E/S recommendations database, obtained between 2000 and 2007, we find that between 6,594 (1.6%) and 97,579 (21.7%) of matched observations are different from one download to the next. The changes, which include alterations of recommendation levels, additions and deletions of records, and removal of analyst names, are non-random in nature: They cluster by analyst reputation, brokerage firm size and status, and recommendation boldness. The changes have a large and significant impact on the classification of trading signals and back-tests of three stylized facts: The profitability of trading signals, the profitability of changes in consensus recommendations, and persistence in individual analyst stock-picking ability.

Comments

[jimocarroll:]

Of course, this is after you throw out the outlier of the CNN blog about ol' Stevie kicking the golden bucket...

"Aside from that, Mrs. Lincoln, how did you like the play?"

Blogger credibility is not homogeneous.

2008 Oct 23 10:13 AM

[mollytjm:]

bloggers are usually younger than the established wall street bunch and when it comes to technology, more in tune. in the tech world of today, innovation on a consistent basis, and fast, is the name of the game. if you take 7 years to develop an 'improved' product, like microsoft and vista..sigh... you lose.
obviously there's a wide range of smartness and honesty in bloggers, but that's no different than in any other group, including wall street. being complacent or 'just a little out of touch' in the tech field is a no-win situation, as the other companies have discovered. in a bad economy, lower income people won't buy tech at all, hurting lower end products. anyone with a job and some extra $ will be buying quality. the store at the kIng of prussia mall, in PA is jammed...the busiest place in the mall, and...the most profitable.
long APPL

2008 Oct 23 11:19 AM

[mack520:]

You fail to mention respected analyst Rob Enderle, lead analyst of the Enderle group, whose record on Apple is in excess of 100%.

2008 Oct 23 12:21 PM