Stock market analysts have a mixed reputation. The best of them know their industries better than some of the participants and it is not unknown for analysts to make the transition to management. That said, not all of them are free thinkers and it can be a soft life to simply parrot the corporate press releases and, in effect, become an extension of the investor relations department.

It is hard to say if the trend is towards the latter because ever tighter rules on disclosure and what is and what is not inside information make truly original research harder.
In some sectors though you don’t need to be a genius to understand what is going on. The most obvious is in the commodity industries of oil and mining where terminal markets for oil, copper and now iron ore make it clear to everyone what is happening to revenue in a way that is not possible in more secretive businesses like banking or insurance.

Oil and metal prices started falling in the autumn of 2014 and carried on declining relentlessly throughout 2015. To be fair to the analysts it is unlikely that they were using the high spot prices of early 2014 in their models for longer term forecasts. Yet, at some point spot prices would have crossed over and fallen below those longer term projections. That was probably last summer when the Glencore share price halved as investors finally got the message that its business model of high cost mines and a highly geared balance sheet were not a good mix in a world of lower prices and higher interest rates.

As is always the way share prices reacted far more rapidly than analysts could change their forecasts, so the shares looked cheap for a long time, especially when allowance was made for the stronger dollar which was related to the other two factors. The information void was not helped by companies, and by extension their spokespeople the analysts, saying that things were not really that bad. Investors were in no mood to be trusting after so many cases of corporations, like Tesco and VW, attempting to reassure investors with platitudes after misleading them.

Even now some analysts are forecasting that Anglo American will pay a dividend in 2016 when the company said in December it won’t. They are…

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