Can you trust a Wall Street Analyst?

I've got a personal beef with what is going on down on Wall Street. I bought shares in a company a while ago because of the opinion of analysts who had rated the business highly: the future estimates EPS, revenue, profit margins, overall growth, management were considered unparalled in the business. I bought the shares at 22.50. All the way down to 1.60 the analysts did not change their opinion of the company or shares. I am ultimately responsible, but the analysts lost any trust i may have put into them.

Now this article at Forbes comes out and simply confirms what I've thought all along: the analysts have been corrupted.

The Quote:

Others have reached different results. But there are reasons to believe that Wall Street analysts--especially as they reach all-star status--will ride with the herd, that they will indicate the present trend rather than accurately predict the future. One reason is that when an analyst is consistently negative about a company, he will tend to drop that company from his coverage rather than maintain a "sell" rating for long.

This behavior is part of a wider effort to conform, according to a 2001 study by Ezra Zuckerman, a professor at Stanford University's Graduate School of Business. "As you move up in a status hierarchy, you become more committed to your role or community, and therefore less likely to deviate from convention," Zuckerman said. This finding shows why the supposedly lesser lights at the research-only houses are more willing to deviate than the stars at, say, Merrill Lynch (nyse: MER - news - people ). The "best" sell-side analysts may tend to migrate to the buy side, where they can make even more money managing mutual funds or hedge funds.
The urge to conform is felt another way. According to A Random Walk Down Wall Street, the classic text by Burton Malkiel, the vast majority of analysts predict future earnings simply by extrapolating from past earnings growth. Malkiel's conclusion: "Security analysts have enormous difficulty in performing their basic function of forecasting earnings prospects for the companies they follow. Investors who put blind faith in such forecasts in making their investment selections are in for some rude disappointments." This conclusion is cited often. But as the search for sages continues, the limits of their wisdom is even more often ignored.

Now the brokerage houses are already suffering from a massive conflict of interest. The same companies that provide financing and underwriting for a company will have analysts that cover that same company. Well what do you think the analysts will say about a company that their boss has a financial stake in?---->it will be generous.....

In June 2000, by contrast, 0.7% of the calls were to sell and 74.6% were to buy.

If you remember this period, the crash had already begun by the summer of 2000. But in 1999, a revision from "strong buy" to "buy" was considered a "strong sell" recommendation.

But the brokerages and analysts were not the only ones who are in on the scam. The publications who ran front cover stories on the brokerages and analysts were complicit. Easy softball questions were lobbed at the industry schmucks "Do you think a rally is imminent?" ..."how close is the recovery?"..."How hot is biotech?" were standard questions to ask. Instead of being honest, the investment industry lied and continues to lie. All throughout the downturn, the business media and analysts have said the turnaround is one quarter away.

Now maybe it is and maybe it isn't, but i won't be listening to them. Independent research is the only way to get any information. For my money, I'll stick with oil, gas and banks. Thanks for nothing.