'Buy, But Sell' - What Are Analysts Thinking?

One has to wonder about stock analyst thinking when one reads releases like the one I've copied below. Please feel free to take the advice of Jeffrey Fan and 'sell' shares of Canadian Telecom provider Telus (TU) for the short term, but make sure that you buy Telus shares because they're cheap if you are a long term investor. It would be very easy to interpret this advice to mean 'sell the shares now, but buy again later when the stock is still at these low levels'. In other words trade/time the stock.

What ever happened to sound, long term investing in quality companies? Easier said than done, I guess ... Hey, at least he predicted a CAGR of the dividend of 10% through 2011.

Telus upgraded to 'buy' on valuation, but short-term 'sell' remains
UBS analyst Jeffrey Fan remains bearish on Telus Corp., although he has bumped up his rating on the stock to "buy" from "neutral" on share price depreciation. News concerning fresh wireless entrants to the Canadian market and the potential Telus will build a next-generation HSPA network over its current CDMA one could weigh on shares in the short term, Mr. Fan wrote in a note to clients. He maintains his short-term "sell" rating on the stock. Telus shares have lost a third of their value since peaking at a 52-week high of $58.95 last September. Mr. Fan also noted the company has a four-year track record of announcing dividend increases alongside its third-quarter results. He believes this trend will continue and projects a three-year dividend CAGR of 10% through 2011.

Comments

[AlexS:]

He means Buy Low Sell High. Good advice, especially from an analyst.

2008 Aug 25 04:45 PM

[whisperonth...:]

He could have just said that, for those of us who are still learning.

2008 Aug 25 05:32 PM

[Urbane Gori...:]

I really like to see buy ratings when the analyst predicts a lower price than that which the stock is already trading .. And vice-versa....

jegan ;-)

2008 Aug 25 06:00 PM

[ozcutty2:]

Probably better to say buy in 3rds because stock could go lower short term. Standard value investing stuff

2008 Aug 25 08:16 PM

[MSmailbox:]

I agree with ozcutty2... Begin dollar-cost-averaging into a stock, which may go lower in the short-term, while the long-term prospects are still good.

2008 Aug 26 08:47 AM

[kkin365:]

The analyst's language is clearcut and unambiguous. Don't nitpick. You can do better than that.

2008 Aug 26 09:32 AM

[22thoroughbred:]

This way he cannot be wrong, if stock goes down he said "sell" and if it goes up he said "buy" this is why analysts are as useless as tits on a man...no purpose whatsoever

2008 Aug 26 10:07 AM

[Scott Berry:]

Pretty clear to me. Stock has come down, so it has long-term appreciation potential. But short term it's more likely to fall some more than rise, so don't pull the trigger yet.

Note also the way fund managers think: Having money in a stock you think will be flat for some period of time is the same as losing money, when there are other opportunities out there for upside.

2008 Aug 26 10:49 AM

[BrianZach:]

I think he likes the long term prospects of the stock, but there are some short term events which can drive the price down.

There are lots of ways to play this type of information, and it depending on your investment style. If you are short term investor, you can time the market.

Long term people can wait to buy, buy now, hold their position, or start a position today and add more if the price goes down. There isn't a one size fits all prescription, and it depends on the investment style of the manager.

2008 Aug 26 12:00 PM

[Tick Talk:]

Yeah, being an analyst must be tough. All of those supposedly educated opinions to sell and no accountability when the stock doesn't do what you half-way predicted. Wait, who needs analysts?

As an aside, I like the handle of the author. I wrote an article about investing and gardening. Check it: www.ticktalklive.com/2.../

2008 Aug 26 04:44 PM

[Dan Jacome:]

sell side caters more to HFs these days, so they have to cater to very short term thinking as well as their legacy, more traditional buy side clients. You have your SAC Capitals and Fidos of the world of the world -- they are looking at the same stocks and talking to the same analysts: you cant blame analysts for trying to play both sides of the fence all the time -- the business has evolved, for better or for worse, and they're simply adapting.

2008 Aug 26 11:58 PM

[John C. Lee:]

I wrote an article recently explaining even more confusion regarding analysts:

seekingalpha.com/artic...

2008 Aug 27 12:33 AM