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17-01-2011, 08:04 AM
Jan 17, 2011
Analysts' 'buy' calls:
Bull's-eye or just bull
Some most highly rated stocks underperformed STI
By Goh Eng Yeow, Senior Correspondent
AS MARKET sentiment turns bullish, analysts are recommending stocks across the board - but their 'buy' calls may not necessarily turn out to be winners.
Some counters in Singapore, which were the most highly rated by local analysts last January, went on to underperform the Straits Times Index (STI) in the past 12 months, Bloomberg data showed.
Take blue chip United Overseas Bank. Last January, the counter attracted a whopping 21 'buy' calls from the 24 analysts covering it. But it ended up seeing a 1.44 per cent loss in the past 12 months, lagging far behind the STI, which rose 11.5 per cent in the same period that ended last Friday.
Another closely watched blue chip, DBS Group Holdings, was down 2.13 per cent, even though it got 14 'buy' calls from analysts.
Plantations giant Wilmar International, which also attracted 14 'buy' calls, turned in an even weaker performance, falling by 18.89 per cent in the past year.
Conversely, many stocks which performed well over the year were largely overlooked by analysts and drew fewer 'buy' calls a year back.
The share price of casino player Genting Singapore rose by 77.42 per cent in the past year, even though it attracted only seven 'buy' calls from the 19 analysts covering it last January, before its highly successful Resorts World Sentosa opened its doors.
Analysts did only marginally better with regard to palm oil giant Golden Agri-Resources, which surged by 30.51 per cent, even though only about half of the 14 analysts covering the stock were positive about its prospects at the start of last year.
The situation is similar in New York, with stocks doing well even though they have been unpopular with analysts.
The Wall Street Journal noted recently that 10 of the least favoured stocks on the S&P 500 Index made an average gain of 32 per cent last year, compared with the index which was up only 13 per cent.
But some dealers cautioned that before comparing analysts' recommendations on a stock and its sub-sequent 12-month performance, investors should take other factors into consideration.
The key to successful investing is not to buy a blue chip and leave it sitting there.
'You should constantly monitor any changes which may affect its price,' said remisier Thomas Lee.
'Stock recommendations are not static. They are based on assumptions, which may change over the course of the year,' said boutique finance house NRA Capital executive chairman Kevin Scully.
Both UOB and DBS underperformed the STI last year because of concerns that the extremely low interest rate environment would squeeze their profit margins, he added.
Wilmar had underperformed the market as it came under selling pressure last month, following its foray into property development in China.
As for Genting's star performance, few analysts could have anticipated last January that its Sentosa casino, which opened a month later, would turn out to be such a huge crowd-puller.
The stunning success caused investors to salivate over its business prospects, following widespread publicity that a businessman lost $26 million in a three-day gambling spree there in June.
Some dealers also noted that while they regularly send out analysts' research reports to investors, the final judgment should be made while weighing the prevailing market sentiment.
UOB Kay Hian remisier Charlie Lim said: 'I rely on the price charts a lot more to tell me if the stock is a 'buy' or a 'sell'. The analysts' reports come in handy when the price of a stock starts to move, and my clients want to know more about it.'
engyeow@sph.com.sg
Analysts' 'buy' calls:
Bull's-eye or just bull
Some most highly rated stocks underperformed STI
By Goh Eng Yeow, Senior Correspondent
AS MARKET sentiment turns bullish, analysts are recommending stocks across the board - but their 'buy' calls may not necessarily turn out to be winners.
Some counters in Singapore, which were the most highly rated by local analysts last January, went on to underperform the Straits Times Index (STI) in the past 12 months, Bloomberg data showed.
Take blue chip United Overseas Bank. Last January, the counter attracted a whopping 21 'buy' calls from the 24 analysts covering it. But it ended up seeing a 1.44 per cent loss in the past 12 months, lagging far behind the STI, which rose 11.5 per cent in the same period that ended last Friday.
Another closely watched blue chip, DBS Group Holdings, was down 2.13 per cent, even though it got 14 'buy' calls from analysts.
Plantations giant Wilmar International, which also attracted 14 'buy' calls, turned in an even weaker performance, falling by 18.89 per cent in the past year.
Conversely, many stocks which performed well over the year were largely overlooked by analysts and drew fewer 'buy' calls a year back.
The share price of casino player Genting Singapore rose by 77.42 per cent in the past year, even though it attracted only seven 'buy' calls from the 19 analysts covering it last January, before its highly successful Resorts World Sentosa opened its doors.
Analysts did only marginally better with regard to palm oil giant Golden Agri-Resources, which surged by 30.51 per cent, even though only about half of the 14 analysts covering the stock were positive about its prospects at the start of last year.
The situation is similar in New York, with stocks doing well even though they have been unpopular with analysts.
The Wall Street Journal noted recently that 10 of the least favoured stocks on the S&P 500 Index made an average gain of 32 per cent last year, compared with the index which was up only 13 per cent.
But some dealers cautioned that before comparing analysts' recommendations on a stock and its sub-sequent 12-month performance, investors should take other factors into consideration.
The key to successful investing is not to buy a blue chip and leave it sitting there.
'You should constantly monitor any changes which may affect its price,' said remisier Thomas Lee.
'Stock recommendations are not static. They are based on assumptions, which may change over the course of the year,' said boutique finance house NRA Capital executive chairman Kevin Scully.
Both UOB and DBS underperformed the STI last year because of concerns that the extremely low interest rate environment would squeeze their profit margins, he added.
Wilmar had underperformed the market as it came under selling pressure last month, following its foray into property development in China.
As for Genting's star performance, few analysts could have anticipated last January that its Sentosa casino, which opened a month later, would turn out to be such a huge crowd-puller.
The stunning success caused investors to salivate over its business prospects, following widespread publicity that a businessman lost $26 million in a three-day gambling spree there in June.
Some dealers also noted that while they regularly send out analysts' research reports to investors, the final judgment should be made while weighing the prevailing market sentiment.
UOB Kay Hian remisier Charlie Lim said: 'I rely on the price charts a lot more to tell me if the stock is a 'buy' or a 'sell'. The analysts' reports come in handy when the price of a stock starts to move, and my clients want to know more about it.'
engyeow@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
