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Friday Charts: Overly Bullish Analysts And The Dumbest Trade In The Market

If you’re new to the Wall Street Daily nation, here’s the rundown…

I’ve embraced the adage that “a picture is worth a thousand words.” So each Friday, I hand-select compelling graphics to put the week’s investment news into perspective.

All it takes is a quick glance and you’ll be up to speed — this time, regarding analyst sentiment, digital disruption and the dumbest trade in the market.

Whoever said achieving enlightenment isn’t easy? Enjoy!

Consensus or Contrarian

Sell-side analysts are notoriously liberal with their buy ratings and stingy with their sell ratings. At any given time, buy ratings outnumber sell ratings by a factor of 8:1.

Clearly, all those stocks aren’t screaming buys, though. So what are analysts good for? Absolutely nothing — except perhaps serving as a contrarian indicator.

Don’t just take my word for it.

“We have found that Wall Street’s consensus equity allocation has been a reliable contrary indicator,” says Savita Subramanian, the head of equity and quant strategy at Bank of America Merrill Lynch.

“In other words, it has historically been a bullish signal when Wall Street was extremely bearish, and vice versa.”

Where do we stand now? Well, don’t kill the messenger. But the consensus is trending rapidly in a bearish direction.

In fact, the latest survey of Wall...


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