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The Analyst Game

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December 19, 2006 – Comments (2)

Post bubble, we all heard that analysts were walled off from the Investment Banking side of things by the so-called Chinese Wall.

This thing, from what I can tell, is as porous as swiss cheese. (Sorry, I don't know any Chinese cheeses with which to continue my analogy.)

Be very careful when you begin to see outperform calls on recently IPOed stocks. Check the filings, and you will find -- I'm guessing, at least 90% of the time -- that these calls come from the same firms that took the company private.

Case in point: Bare Escentuals (BARE)

Among the many people pumping this overpriced makeup provider are three Wall Street Firms.

Piper J, Thomas Weasel, and Sun Trust.

The other day, when Tom Gardner was talking trash about my thumb down on this stock (because he saw a full store at the Mall of America, he told me...) I looked at the filings. I'd already run the numbers to see that the stock was priced for huge growth, and I already knew makeup is quite fad-driven and shortlived.

What I didn't know, until I looked, was that PJ, Weasel and Sun (lack of) Trust were all in on underwriting BARE, and now they all call outperform on the shares?

Reminds me -- just a tiny bit -- of the situation at HOKU, which everyone LOVED, until they didn't. A PJ analyst got pretty huffy with me when I suggested that the PJ call on HOKU was not only stupid, but possibly compromised by the banking relationship. (http://www.f...he-wise.aspx)

(http://www.f...th-hoku.aspx)

Well, the HOKU chart shows who was right about that one...(http://quote.fool.com/chart.aspx?s=hoku)

I hope for the sake of BARE holders that I'm not right on this one as well.

2 Comments – Post Your Own

#1) On December 19, 2006 at 8:51 AM, TMFBent (99.81) wrote:

"that these calls come from the same firms that took the company private."

I meant public there, of course...

I think we could use an edit button... Other blogs have 'em, right?

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#2) On December 19, 2006 at 10:40 AM, LeanieBean (63.15) wrote:

"What I didn't know, until I looked, was that PJ, Weasel and Sun (lack of) Trust were all in on underwriting BARE, and now they all call outperform on the shares?"...niiice. I can't help but think you're right, re: BARE Seth. This is coming from someone too who saw their products stocked to the hilt at Sephora stores this weekend, and asked multiple sales folks for their take on the product. Ladies I work with love it, as does my sister (who hopped on it via a real live dermatologist review)...call me a cynic, but anyone can/will offer mineral based (more natural), etc. products moving forward, and given their financials, etc. it feels like they've in a way bit off more than they can chew outside of popularity for a few quarters. Happy to be proved wrong on it though...it's a interesting one to track. Cheers and thanks for blogging your insight re the recently IPOed. E

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