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Research Reports

I may not follow analysts' buy/sell advice because of their positive bias, but I still avidly read their research reports. Some don't say much, but many are filled with essential information about the company's business plan, the problems it's encountering, and the analysts' take on the competition and industry trends. That's valuable information that would require days of research if you did it on your own.

Further, you can often deduce that a buy rating really means sell by reading the report. For instance, in late June 2001, investment banker Credit Lyonnais reiterated its add recommendation for Global Crossing, then trading at around $9, but at the same time cut its price target from $25 to $12. Or consider ABN Amro's mid-August 2001 report reducing its 2002 and 2003 revenue and earnings estimates for Microsoft, while reiterating its add advice. Whether by reducing the target price, or cutting earnings estimates, an analyst is signaling reduced expectations, and reduced expectations translate to sell.


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