Stocktake: Investors have little to cheer despite 40% rise in Nokia stock on Microsoft deal
Fourth-quarter growth estimates, too, have fallen from 18 per cent in January to 10 per cent today.
It doesn’t matter, according to Morgan Stanley bull Adam Parker, analysts are always too optimistic.
Since 1976, the median growth forecast in January for the year ahead has been 14 per cent, he found, compared to actual growth of just 5 per cent.
Analysts invariably have to reduce estimates as the year progresses.
Stocks, of course, have done just fine since 1976.
“The market can work well even as the base case is being revised downward,” said Parker, who predicts 12 per cent upside for the S&P 500.
‘Gangnam’ shares riding high
Shares in South Korean company DI Corp soared almost 800 per cent in three months last year following the global success of Gangnam Style by rap artist Psy.
DI Corp was founded by the rapper’s father, who remains chairman, with the resultant publicity driving the stock skyward. Despite subsequently plunging, the stock still ended 2012 roughly double its pre-Gangnam price.
Why? A new study discusses the investor recognition hypothesis developed by Nobel laureate Robert Merton. Countries displaying the most enthusiasm towards Gangnam Style (as deduced by the number of parody videos and flash mobs uploaded onto YouTube) saw the highest level of investing in DI Corp, the study found.
Investor awareness has long-term as well as short-term consequences. “In such a case, [part of] the stock price increase would be permanent,” the authors suggest. That certainly seems to be the case – DI Corp is up another 150 per cent in 2013.
The study is at http://iti.ms/15GXBcT
White’s targets way off the mark
It’s true that analyst share price targets are a bit of a joke but there’s usually some pretence as to their seriousness, with all kinds of fundamental quackery outlined to justify a particular price point.
US analyst Brian White, however, doesn’t try to disguise just how gimmicky his targets are.
Back in 2011, while at the Ticonderoga brokerage, he had a $666 price target on Apple.
In 2012, after joining Topeka Capital Markets, he slapped a $1,001 price target, later upping that to $1,111.
But as Apple shares tanked, he lowered his target to $888.
Now he’s joined Cantor Fitzgerald, which gave Apple shares (currently languishing around $500) a lift last week by initiating a buy rating.
So what’s it worth? $777, of course.