Wildbill
01-14-2003, 03:43 AM
I work in corporate finance and as a result get to read a dizzying amount of analyst reports about our company as well as plenty of others. The latest babble they like to talk about in their "valuations" are key words such as "free cash flow" and "diverse holdings", all topped up with "clean balance sheets". That is all fine and good, but they use these metrics to justify paying PREMIUMS on certain stocks. This is so ridiculous. These guys all get MBAs from Ivy League schools to say this??? Come on geniuses, even guys without MBAs like me know you are supposed to value companies fairly and then DISCOUNT companies that don't have these qualities you seem to suddenly have decided are worthwhile this quarter.
I met with two of the honchos of research for our industry at a recent industry conference and since I luckily didn't have an ID badge on and I deal with their underlings so they don't know me, I asked them about this. They both ranted about how in these uncertain times such measures were justified. It was silly I said, imagine if I went into McDonalds back in the time that Jack in the Box had their E Coli outbreak and found that the hamburgers all suddenly cost 30% more. I asked the manager why and they said in these times of uncertainty with hamburger meat, we are charging a premium for our burgers because we don't have E Coli here. Now how would that play out I asked. (I am not kidding, I asked this exact question) One analyst just kinda laughed quietly and said "well no one was going to McDonalds during that time so they couldn't do it then". The other said it was ridiculous because the market is valuing these things and they should do the same to "keep up with the forces driving the market".
I know analysts have little value to most of us and dealing with them I can say its with good reason, but its just appaling that they are doing this. It is just like they decide what way the wind is blowing and value accordingly. To think people fight and scratch to get jobs like this is a farce.
I met with two of the honchos of research for our industry at a recent industry conference and since I luckily didn't have an ID badge on and I deal with their underlings so they don't know me, I asked them about this. They both ranted about how in these uncertain times such measures were justified. It was silly I said, imagine if I went into McDonalds back in the time that Jack in the Box had their E Coli outbreak and found that the hamburgers all suddenly cost 30% more. I asked the manager why and they said in these times of uncertainty with hamburger meat, we are charging a premium for our burgers because we don't have E Coli here. Now how would that play out I asked. (I am not kidding, I asked this exact question) One analyst just kinda laughed quietly and said "well no one was going to McDonalds during that time so they couldn't do it then". The other said it was ridiculous because the market is valuing these things and they should do the same to "keep up with the forces driving the market".
I know analysts have little value to most of us and dealing with them I can say its with good reason, but its just appaling that they are doing this. It is just like they decide what way the wind is blowing and value accordingly. To think people fight and scratch to get jobs like this is a farce.