MAY 7, 2009, ET.Best on the Street
In a Difficult Year, Success Is Knowing When to Say Sell
By ANNELENA LOBB
This year's Best on the Street analysts knew when to scream "sell."
Stocks took an epic tumble in 2008, the year covered in the Wall Street Journal's 17th annual analysts survey, as a cascade of bank failures, bailouts and acquisitions rocked the financial system. The Dow Jones Industrial Average lost 33.8% and the S&P 500-stock index fell 38.5%, with most of the turbulence toward the end of the year.
Best on the StreetFor more details and stories about the winning analysts, see The Journal Report coming May 26.
Analysts who based their predictions on a gloomy outlook for the banking system and the global economy often turned out to be right. Consumer spending fell sharply. Problems with the housing market rippled through other parts of the economy, and oil prices peaked and sank. The stock pickers who could forecast the storm were the strongest performers.
An amazing surprise: the people chosen in May 2009 as the best analysts of 2008 were those who "knew when to say sell.". Talk about in sample data ! Would one have expected that the people chosen as the top analysts of 2008 have recommended buying stocks throughout last year. Of course the really interesting question would have been: How did the top analysts of 2007 (chosen in may of 2008) do in their forecasts for 2008 ?
Or how about checking on the recent record of this analyst cited in the article:
Across industries, many of the most prescient calls were early sell recommendations. The top computer-and-office equipment analyst, Mark Moskowitz of J.P. Morgan Chase & Co., put a sell on Sun Microsystems in March 2008, anticipating that companies would delay purchases of costly equipment. The shares lost three-quarters of their value though year end.
Sun Microsystems stock has doubled since the beginning of March (see the chart). Did Mr. Moskowitz make a "prescient call" on when to get back into Sun stock ?