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Dr. Price writes about stocks, options and the market every weekday on Real Money Pro, a subscription site onTheStreet.com. Paul has been a speaker at the International Traders Expo in New York City and the Options and Forex Expo in Las Vegas. He also gives investment seminars for subscribers... More
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  • Why You Can't Trust Brokerage Research - Further Proof 3 comments
    Aug 29, 2012 9:51 PM | about stocks: JOSB

    Brokerage analysts are always looking for an edge to show they offer 'value-added' information. If you're not paying strict attention you might think they did. Here's yet another example of how the cheating occurs.

    Sterne, Agee & Leach made a bold call early Wednesday morning. They predicted Jos. A. Bank's (NASDAQ:JOSB) earnings would rise and they loved the shares at the current $41.63 price. As Will Shakespeare's Hamlet once said, "Ay, there's the rub."

    As it turned out, JOSB had already reported, and Reuters had broadcast JOSB's much better than expected earnings and same store sales. Their shares were up 13.5% already in premarket trading.

    JOSB had a gap opening at $48.00 - up $6.37 or + 15.3% from Tuesday's close. Nobody could buy the stock today at anywhere close to the price where Sterne, Agee & Leach will take credit for putting on their recommendation.

    Anyone silly enough to act on Sterne, Agee & Leach's research blurb by buying at the open was down 1.17% by 4 pm.

    Why did Barrons.com contribute its good name to this deception?

    The day's range was $47.29 - $49.48 with the intra-day low coming with just minutes to go. The chart speaks for itself.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: JOSB
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Comments (3)
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  • Walt17
    , contributor
    Comments (415) | Send Message
     
    Paul, it looks like you misread the Stern release. To me it clearly says: "FOLLOWING a strong second quarter report, we are raising our estimate..." (emphasis mine)

     

    Not a criticism, I misread things also, just wanted to point it out. And I totally agree with your point: I don't trust brokerage reports.
    29 Aug 2012, 09:59 PM Reply Like
  • Paul Price
    , contributor
    Comments (1508) | Send Message
     
    Author’s reply » The point was not that they hadn't seen the report. It was that they were recommending it at a price that was nowhere close to being available.

     

    They took credit for the upgrade at $41.63 - the last trading price BEFORE the earnings were released.

     

    It opened at $48 and was already up big when they released their deceptive blurb.

     

    Sterne, Agee & Leache will now take credit for 'making' the difference between the recommended price (from yesterday) and today's close.

     

    No investor could have made that trade by acting on their advice.
    29 Aug 2012, 10:05 PM Reply Like
  • Adib Motiwala
    , contributor
    Comments (372) | Send Message
     
    I agree with the principle of not trusting others research. however in this case "Following a strong second-quarter report, we are raising our estimates and target price on Jos. A. Bank Clothiers to $60 from $57 based upon 13 times forward."... So they were already bullish on it prior as well....

     

    I am not sure why they put out that old price...did Barrons do it or its a practice of putting up last trade from previous day..i cant tell. I never worked in Sell side.
    29 Aug 2012, 11:32 PM Reply Like
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