Really?! Brokers Trade Lower on Citi Call

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 (MS), Goldman (GS) and Lehman (LEH), and maintained estimates for Merrill (MER). 

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.

click to enlarge

Comments

[pdd:]

Who has the best track record and what are they saying ?

2008 Aug 21 11:48 AM

[who:]

guess, the strategy is to do the opposite of citi's calls

2008 Aug 21 12:02 PM

[SoCalsurfbum:]

His target price for GS is $205 in this new report while it is currently trading at $153... and it is still only a hold rating...

What... an expected 35% increase isn't big enough for a buy rating?

I find it amazing how "Analysts" are never paid on their abilities to analyze...

2008 Aug 21 03:10 PM

[John C. Lee:]

Funny how some analysts keep their "Buy" ratings, but cut price targets by as much as 20%, 30%, or even 50%. Wouldn't that be a "Hold" or "Sell"?

2008 Aug 21 08:10 PM

[watching lines:]

I'd loeve to see the expert analyst's calls on Bear, FNM and FRE prior to their collapse...wonder how many had Buy ratings?

2008 Aug 22 01:27 PM

[watching lines:]

Weekly, that's the inherent conflict in investment banking. The syndicate guys get realy pissed when the retail research guys issue a Sell on a company they're trying to do a deal with. I've been in the brokerage industry for 23 years, and it only took me a year to recognize the problem. That's why for the pasr 22 years, I've been using technicals ONLY!

2008 Aug 22 01:31 PM