How can investors trust analysts who can't tell the difference between a company that's solvent and one that is worth virtually nothing to shareholders. We've seen other examples here where analysts appear fraudulent in their recommendations. The latest example? That of Lehman Brothers (LEH).
Yesterday, the company filed for bankruptcy, and the share price lost 95% of its value. However, rumours have persisted for months that this bank is due to fail. The company has been desperately trying to sell off assets to raise cash to remain solvent, but last week it appeared their last-ditch efforts had failed.
Yet on the Friday (Sept 12th) before the imminent bankruptcy, here is a summary of the recommendations of the 19 analysts that were covering LEH according to Thompson/First Call:
There is not a single 'Sell' rating on this chart! So are the analysts just guessing? One would think that if they were, then surely at least one analyst out of nineteen would rate this a sell. Were some of these ratings made months ago? Perhaps, but they are nevertheless still current (and not listed as suspended). In fact, 3 days before the would-be bankruptcy was announced, both Citigroup and Argus downgraded LEH from 'Buy' to 'Hold'. Hold?! Not 'Sell'? Does this industry have any credibility?