WHY YOU NEED TO Ignore “BUY” Recommendation

First of most, all investment-banking institutions do not really care about their customer making income or not, instead they just care about generate more income and posting more profit. So they will make a lot of “buy” recommendation for their customer. They never responsible for their call and when their recommendation did not work, they will come out with an increase of facts to encourage you to believe their phrase and cause you to believe you will buy it at a low price. However they will never tell you how low is low. They seldom make “sell” recommendation since cell mean end of a transaction for a counter.

The reason they recommend a stock is very ridiculous. The method they use to determine a cheap stock is outdated. More often than not they will use unsuitable accounting ratio to encourage their customer such as Price/Earning Ratio and Price to book percentage. The single mostly used ratio is P/E proportion.

Investment banks can make a “buy” ask a stock when its PE percentage is below 10 roughly. PE percentage is useless since it used earlier earning level versus current price level which are totally misleading. Current and future earning level might not before be as effective as. This season Just look at all the financials in NYSE earlier.

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They all trade at below 10x PE and look at them now. Besides, PE proportion determine the outlook of future performance of a company. If an organization trading at less than 5x PE, investor think its future is cloudy really. Forget about hidden treasure and greatest story never told, there are no good stock with low PE ratio nowadays.

If an organization is good, its price is low and its own PE is low, I’m sure Mr Buffett, Mr Soros, and everything the big weapon have spotted it. Price to Book percentage is worthless as the reserve value also, as it is computed conventionally, does not include intangible assets such as intellectual brands and property. Thus the book-value or net tangible assets might not be an appropriate measure for many firms. Target price is another tool by investment banks to create revenue.

Target price is absolutely useless as nobody nowadays can target the price tag on a stock 12 months from now. Target price real intention is to make investor greedy and buy that stock. I’ve seen target price for a little company set as high as 200% from the current price. If a stock can go that saturated in the next 12 months, why its price traded at current low level?