The Analyst Game
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.
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