Buy, hold or sell? That is the question, asked in sufficient volumes as to support an entire community of analysts across the globe. But the real question should probably be: “How good are these recommendations to the man in the street?”
To answer this question, we performed a simple simulation. We selected a random set of stocks, 20 with the most bullish analyst calls and 20 with the most bearish, over the past five years (from 2018 to 2022, but excluding 2020). Then for each stock, we picked the point in time (t) when sentiment was the highest (lowest) — using the sentiment bar metric as derived by Bloomberg — and the average target price (TP) at this point. From t, we tracked the individual stock price movements for the next three months. The results are presented in the Table below.
