What To Sell - That's The Big Question
The Sunday Age
Sunday June 24, 2007
ASK a stockbroker what stocks you should buy and you'll get a flood of suggestions. Ask them what you should sell, and don't be surprised if they can't think of anything.
But it's just as important to sell dud stocks as it is to buy tomorrow's champions. The top 10 stocks of today are unrecognisable from the same list a decade ago. In 10 years it will all change again. So how do you find out what to sell? Every week dozens of stockbroker reports cross my desk, and everything seems to be a "buy", or maybe a "hold", but the word "sell" is as rare as a stockbroker publicly supporting Kevin Rudd.Rudi Filapek-Vandyck runs the website www.fnarena.com, a financial media publication that specialises in monitoring stock research. I asked him to run some numbers on just how often Australian brokers actually suggest a stock is a "sell", and the results are a revelation.It's not that stockbrokers never say sell - rather, the market is split between brokers who call just about everything a "buy" and others who soberly suggest up to a quarter of all stocks are not worth touching. Mr Filapek-Vandyck found that ABN Amro only nominated 3 per cent of Australian stocks as a "sell", at Deutsche Bank the number doubled to 6 per cent, at Goldman Sachs JBWere it doubled again to 12 per cent, and at Credit Suisse it doubled again to 26 per cent.In other words, some brokers had eight times more "sell" recommendations than others, yet they were all looking at the same numbers.Says Mr Filapek-Vandyck: "Nobody wants to say sell, but I think the natural figure should be up around 20 per cent. And it's no coincidence that it's the big US brokers who are more likely to tell investors when it's time to sell. It is only three years ago when 10 investment banks - including Credit Suisse - were fined a total of $US1.4 billion ($A1.6 billion) by the US Government for issuing reports consistently favourable to big companies that were also their clients. A report issued last week from Investars Ltd, an American research firm, said that since 2004, when the US stockbroking reforms became law, stock recommendations have gradually become a lot more realistic. Sure, US brokers are still reluctant to say the word "sell", but in February this year the number of "hold" recommendations exceeded the number of "buy" ones for the first time - ever. James Kirby is editor of Eureka Report, an online publication financially backed by Carnegie Wylie and Company. Jk@eurekareport.com.au
© 2007 The Sunday Age