FYI | Jan 19 2018
By Rudi Filapek-Vandyck, Founder & Editor
This genuinely feels like I am reporting about a different galaxy, but when I arrived in Australia back in 2000 there was no quick-time reporting available on stockbroker research. Even electronic wire services like Reuters and Dow Jones were not in on the act.
Standard practice was that AAP, the common news service for a group of newspapers, managed to get possession of (some) broker reports, by the next day or so. An AAP journalist would then write a story, or incorporate the change in recommendation in a market review and, 24 hours later, that "news" was printed in newspapers.
It is against this background that the concept of The Australian Broker Call Report was born. First as a daily email service for a select group of professional investors, later on as the backbone for FNArena, which opened up the opaque world of stockbroker views and ratings to professional and retail investors across Australia.
Within the first year of our humble beginnings one major event took place that instantaneously showed the value of what we were trying to achieve: one given morning analysts at Credit Suisse revealed they had obtained information about serious problems inside the UK wealth management operations of AMP. They urged their clients not to underestimate the depth of the UK problems, and to sell their AMP shares.
From memory here is what happened next: AMP shares faced some downward pressure on the day, but nothing genuinely dramatic. It took a few days before investors genuinely caught up with Credit Suisse's revelation, and still many investors and shareholders would not have been aware of what was triggering the (soft) selling pressure until much later.
At the time of Credit Suisse's warning, AMP shares were trading above $16. As the bad news cycle in the UK gathered traction, the shares kept on sliding until they finally bottomed below $3 two years on.
If investors ever needed any evidence that paying attention to what stockbroking analysts put in their research updates is nothing but good stewardship…
But there is another important message to take home from that Credit Suisse experience: don't simply focus on recommendations and valuations, often the information behind those eye-catchers is of much more importance.
Today, The Australian Broker Call Report has been amended, expanded, broadened and value-upgraded, but it has remained a daily service, Monday to Friday, and an important part of the FNArena service with many additional tools and applications derived from it.
At its core, the set-up is still the same: experienced journalists reporting on what the main experts are thinking, reviewing, projecting and concluding. As such, I consider The Australian Broker Call Report compulsory reading for every self-respecting investor. Admittedly, a major warning like Credit Suisse's in 2001 will be picked up much quicker elsewhere today, but for those with an open mind, and an agile attitude, not afraid to question their own convictions, irrespective of long-term or short-term strategy, there is always at least one piece of valuable insight in the Report, every day.
It's like reading an electronic financial newspaper designed for investors in the Australian share market.
Do these stockbroking analysts get it right every time? Absolutely not! On my assessment, overall accuracy runs at around 60%, or six accurate calls out of every ten made. But note this: there is a long standing acceptance among professional fund managers that whoever gets six out of ten right is doing an above-average job.
He/she who manages to achieve 7/10 is considered an exceptional talent, or simply very, very lucky. (Investors should never underestimate plain luck in this business).
The question as to how investors should use this information to their own benefit simply harks back to their level of experience, knowledge and confidence, and to their specific investment approach and strategy. Jumping on and off recommendation upgrades and downgrades only works under the right circumstances; it certainly doesn't suit all of us.
For those who are eager to stay on top of daily developments, who'd like to learn new things about new companies and sectors, to increase the depth of their knowledge, who are not afraid to have their ideas and perceptions challenged, and who'd like to see the numbers (forecasts, price targets, etc) behind those views expressed by stockbroking analysts, the Australian Broker Call Report can be a very valuable resource.
I should know, I have been reading it myself every day since inception.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.