Do you have a boss who keeps asking you to make decision based on scenario analysis?
Our recommendation are rated as 1 as strong sell to 5 as strong buy, we are constantly being asked...
You have a 4 on the stock, why it is not a 5 given the % of upside?
You have a 3, which is neutral, on the stock, how much more downside do you see and why not upgrade to a 4?
You are positive with the long term growth, why a 2 but not a 4?
Share price has risen a lot, what are you going to do, why not downgrade to 3?
You have a 4, if the stock reaches your target price, are you going to revise up your target price, or downgrade, any room for earnings surprise?
You have a 4, but the share price dropped a lot, are you going to upgrade to 5 to show your conviction?
You have a 2, how much downside can there be, are you going to upgrade to 3?
You would have thought these are simple questions to be answered... but no, every above-mentioned questions require clear and straight-forward arguments to back your decision. My boss likes to challenge your logical thinking and make sure you think through all the scenario cases..
Because I am being forced to answer so many scenario questions, I am taking the revenge on the sell side analysts:
Your fair value for the stock is only 5% away from the current share price, why downgrading to reduce given the limited downside? Are you going to upgrade if the share price hit your fair value?
You are downgrading based on your expectation on poor results for this quarter, is this quarter the trough of the business, do you see improvement in the latter half, why downgrading if you think things are going to improve after this quarter?
Your target price is only 10% away from the current price, why this is your strong pick but not the other one with 20% upside?
Why do you have a neutral but not a sell, if you think the share price is going to underperform?
You have a sell, do you see further downside or deterioration of the business, are you going to upgrade if you see downside is limited?
I am wondering if this habit will spread to my daily life...
Why you are going to the bathroom now but not later?
If you are spending this $ on this, are you going to spend xx more on the other?
If you choose black over white, are you going to choose blue over white as well?
Based on what do you think this will go up? Why not selling if you see more downside to the current level?
Why do you buy this if you know the other one is cheaper?
So my friend, please don't complain why I am constantly asking "why", this is the world I am living in, the world of question marks and explanations for every step to take.
Thursday, July 24, 2008
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