Do Strong Buys Outperform Sells?
You’d logically assume that you’d make money buying strong buys and lose money investing in hold or sell rated stocks. However there’s little evidence to support that assumption.
Research on the subject is inconclusive. Some studies show that holds outperform strong buys and others draw the opposite conclusion. One reason strong buys don’t outperform sells is simply that analysts issue many more buys than sells and analysts can make some really dumb calls.
Consider ADC Telecommunications, a maker of broadband equipment for telephone, cable TV, and wireless communications systems. I’ll track the advice given by one analyst who initiated coverage of ADC in February 2000, just before the collapse of the then still ...
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