I am not a Dick Bove fan and I get really tired listening to his back-and-forths on financials. Other than his desire to appear on CNBC or any other media outlet that is willing to put his mug and comments on air, I am not sure what makes Bove (or any other individual analyst) an authority on stocks. Let me clarify, I am not a fan of Wall Street analysts in general. I am “analyst agnostic.” I don’t love them… I don’t hate them... I don’t believe them much. Certainly there are a few good ones. Certainly there are a few terrible ones. Certainly there are a bunch of overpaid ones who are irrelevant and may be either good or bad, but irrelevant anyway.
However, I do care about freedom of expression and the right to have an opinion, whether right or wrong, as an analyst or as an American. Last week, Dick Bove wrote a piece based upon his own analysis of banks that may be at risk for failure (a la IndyMac.) One company named, BankAtlantic, has sued him for defamation.
I haven’t read the report and I find it irrelevant for what I do. Personally, I think it is irrelevant just like I used to think it was irrelevant when analysts pumped up stock prices a year ago by creating lists of stocks that would be acquired by Private Equity. But I do hope that he did better with his list than the FDIC did with their list, especially considering that the group that is responsible for protecting depositors found a way to keep IndyMac off their list.
Regardless of whether Bove was right or wrong about who is in trouble, he has a right to have an opinion and a list. Just as a bank and their management team has a right to be wrong about how they manage their bank. In both cases, shareholders have a brain (or should have a brain) and an ability to do their own analysis and determine whether a company is worthy of their investment.
I remember Colin Devine of Smith Barney being critical of Conseco and all the threats he had to endure. For the record, Devine turned out to be right about a stock that became worthless and a company that went down as one of the largest bankruptcies in American financial history. Bove is in good company… if he turns out to be right. If he turns out to be wrong, he is in the same company as he exists now. Herb Greenberg commented on this topic a few months ago in this very good article.
But where is the damage to BankAtlantic (BBX)? Did they get their feelings hurt? Poor babies. As for the stock… on the day that Bove put BankAtlantic on his list (July 13, 2008 was a Sunday), the stock opened at $1.20 per share (on Monday July 14, 2008) ….now it’s at $1.89 per share…ABOUT 60% HIGHER! Seems to me that investors decided that Bove was wrong. That is what they should do with any analyst. Make their own decision regardless of what the analysts say and regardless of what the company says.
For the record, maybe it would have been better if Bove had published his list over a year ago in January of 2007. BBX, BankAtlantic stock was about $13 per share back then. Sorry to point out the obvious here but who the hell should be sued for causing BBX to go from $13 to $1.30 per share? I don’t think Bove or any other analyst did that. Let me get this straight…Bove makes a list and the stock goes up almost 60% in a week and that is harmful to BankAtlantic, their management and their shareholders. Meanwhile….someone else went without being sued as the stock dropped 90% in 18 months. Okay… I got it.
For the record, I had an UP signal on BBX from 6/23/08 until Bove’s list came out. I was wrong on that to the tune of -33% in 3 very bad weeks. I didn’t get a thank you for my optimism and didn’t want one. What I think is going to happen to BBX has nothing to do with Bove. I make up my own opinion as everyone should. We are right sometimes and we are wrong sometimes. All of us. Investors, analysts and yes, executive management.
Analysts analyze. If they are wrong, their employer and the market holds them accountable. That’s the way it should be. Companies manage their business. If they are wrong, the market holds them accountable. That’s the way it should be. I just don’t see how Bove defamed anyone. If he was wrong or sloppy, his reputation and the reputation of his firm will receive the appropriate punishment by the market.
I suspect companies have been emboldened by the SEC and other government support to blame short sellers and anyone who dares be negative. I get that, but when we attempt to stifle any critics, we are running down a very dangerous path. I’d really like to see the company find a diplomatic way to remove the lawsuit and get back to managing their bank. As for Bove, I really don’t care what he says.