If an analyst gives a positive vote for a stock, its price often rises. But the forecast quality of the past 30 years was at best mixed.
Dass equity analysts are optimists is by no means new. It is in the nature of things, because anyone who is considering buying stocks has to be convinced that it will turn out well.
The suspicion that analysts are fundamentally too optimistic has always been harbored. The multi-family office HQ Trust has now impressively substantiated this assessment with figures.
Fund manager Sven Lehmann, divided into 20 sectors, compared analyst estimates for the past 30 years with reality. And accordingly, the forecast profit exceeded the ultimately generated average by more than 16 percentage points.
Overlooked real estate boom
The experts at the banks were the most wrong, where the deviation was more than 43 percentage points – and that with an immense spread, which means that the forecasts of the individual experts sometimes differed widely. Apparently the analysts were “surprised by the terrible news from the banking industry,” says Lehmann.
Conversely, they probably did not take notice of the ongoing real estate boom either. Because here the forecasts were on average almost 7 percent too low – the only industry where this was the case at all.
The predictions seem to have applied better to the auto industry, where they were practically exact on average. “However, the deviations were also the highest here,” says Lehmann.
The real estate industry was also the only industry in which analyst forecasts were more often too low (17 years) than too high. In the “personal care, drugstore and grocery stores” sector, however, the analysts were not overly pessimistic in a single year.