Title: Wall Street Analysts and Stock Picking: Can They Deliver?
Professional analysts have a crucial role in the stock market, with responsibilities ranging from questioning management to estimating earnings and providing company and industry insights. However, a long-term study suggests that their stock picking abilities are no better than an average investor's, like Aunt Louise. Each January, the analysts' favorite and least favorite stocks are tracked and compared at the end of the year. Over 26 years, the analysts' top-adored stocks have averaged a return of 7.25%, the disliked ones 6.89%, and the S&P 500 Total Return Index 12.57%.
In the previous year, the analysts' most beloved stock, Schlumberger Ltd., plummeted while their despised picks, such as Moelis & Co., had modest gains. Over the years, neither group significantly outperformed the index, leaving investors skeptical of analysts' stock picks.
As we enter 2025, the analysts show an affinity for airline stocks United Airlines Holdings and Delta Air Lines, while Arcelix Inc., a biotech company focusing on cancer therapies, boasts 19 "buy" recommendations. On the contrary, ZIM Integrated Shipping Services Ltd. tops the list of analysts' disfavored stocks, followed by Ginko Bioworks Holdings, CNX Resources Corp, and AMC Networks Inc.
Despite their representatives in high places, analysts' stock-picking prowess remains questionable. While they provide valuable industry insights and information, the success of their recommendations is not consistently better than that of an average investor.
S&P Global's latest report reveals that Schlumberger's performance in the stock market last year was quite different from the analysts' predictions, underperforming significantly. Analysts at the moment are expressing optimism towards United Airlines Holdings and Delta Air Lines, two prominent airlines, in their stock market outlook for 2025. However, a biotech company, Arcelix Inc., receives a substantial number of 'buy' recommendations, even outshining the favorited airline stocks, challenging the analysts' typical preferences.
