Brokers' stock research revisited

The Wall Street Journal quoted (paid subscription required) an ranking of brokerage research. Its conclusion? "Brokerage firms' own advice on when to buy and sell stocks is becoming more reliable". That's the good news. Here's the bad news:

In the Investars ranking, six out of 23 brokerage firms research recommendations trailed the S&P 500 over the past year. Just think - that means that in aggregate those research departments destroyed value in addition to their cost. Here's the list of failures, in (literally) descending order:

  • Morgan Stanley, trailed the S&P by 1.11%
  • Thomas Weisel Partners, trailed the S&P by 1.39%
  • Argus Research, trailed the S&P by 4.16%
  • Market Profile Theorems, trailed the S&P by 6.5%
  • ValuEngine, trailed the S&P by 7.72%
  • Bear Stearns, trailed the S&P by 8.67%

The remarkable thing about this list - if it's accurate and meaningful - is the presence of Morgan Stanley and Bear Stearns, two leading investment banks.

Yet another headache for Phil Purcell...