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Chapter 11. Snakes and Ladders: Spinning... > Red Flag 1: When an Analyst Doesn’t ...

Red Flag 1: When an Analyst Doesn’t Kick the Tires or Even Read a Company’s Filings

If you read a brokerage research report and everything seems to be based on company presentations and comments by a CFO rather than independent inquiry, you may be dealing with an analyst who mightn’t be able to tell you what a tire is, let alone kick one. In the past 10 years, the pressures on many analysts to help win deals for their firms’ investment banking division and the lack of incentive for hard-nosed research meant that much of what was produced was spoon-fed to the analysts by companies. Sometimes, the companies even helped write the reports by suggesting changes to drafts they were sent ahead of release. Of course, this is bad, lazy, tainted research—no ifs, ands, or buts.


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