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When Making Investment Decisions, Ignore The Analysts and So-Called Experts

9 May 2008 No Comment

If you follow the market, you undoubtedly have witnessed the ridiculous actions of analysts and “experts” when it comes to evaluating stocks and making recommendations. Apple (AAPL) is my favorite example of making analysts look like fools. Let me explain.

More and more it seems that analysts will upgrade or downgrade a stock, specifically Apple, after it has begun to trend in one of those directions. In 2007, analysts were lining up to upgrade the stock and continually upping their price targets, while Apple was trending up towards $200 a share. After Apple sharply corrected, analysts started downgrading the stock and lowering price targets.

What a load of crap. These people are getting paid to do this? Recently, one of the most well known analysts named Shaw Wu, downgraded the stock, then two weeks later upgraded the stock. Two weeks! Did Apple’s core strategy and business fundamentals change over those two weeks? Of course not.

Forget the Analysts

The analysts have to make many upgrades and downgrades because it makes them look like they matter. Few analysts will ever slap a $400 price target on Apple, then sit back and watch for several years as the stock climbs towards that number. It would make them look lazy.

These analysts are not in the business of helping you make investment decisions. They exist to make news. If one of these hot shots, downgrades your stock, which you have researched and found to be a great long term investment, then you should hope that the stock drops a few points. It will provide you with an additional buying opportunity to add to your position.

The bottom line is these analysts do not care about helping you make money. Do your research, listen to sources you trust, and stick to your strategy. It will pay off.

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