Wall Street is a rigged game. And if you’re an individual investor with just a few thousand dollars at play, the quicker you learn this the better off you’ll be.
Right now we’re in the middle of earnings season, one of the biggest pieces of Wall Street theater, and lots of folks will be crowing about “beating expectations.” But consider that the majority of stocks in the S&P 500 index have beaten the Street every year since the third quarter of 1998. Particularly galling was that in Q3 of 2009, right after the market bottomed, nearly 80% of companies in the S&P topped forecasts.
See what I mean? Don’t tell me the analysts just happen to set the bar that low on accident.
Further proof: Factset reports that of the more than 10,500 ratings on S&P 500 stocks heading into 2012, 54% were buy ratings, 42% were holds — but just 4% were sell ratings. That’s right. According to the “experts,” you’re safe if you’re hanging on to 96% of equities out there. Wrap your head around that one.
I could rant for a while about the so-called “smart money” on Wall Street. But whining doesn’t change anything. So, so let’s talk about how you can find a way to count cards in this rigged game, and maybe make a few bucks in the process.
Here’s my tip: If 95 “experts” on Wall Street are saying to buy a stock and fiver are telling you to sell — those five folks probably represent a majority opinion. After all, sticking your neck out to make a crazy downside call is no way to make a living on Wall Street. The order of the day is always outrageous upside targets — like the $700 to $800 forecasts for Apple (NASDAQ:AAPL) over the last year or two from “top investment banks.”
If any of the cheerleading fat cats on Wall Street has given up, that’s a sure-fire sign that disaster is about to strike.
So what stocks are so awful that even buy-happy analysts have to admit that they’re doomed? Here are three in particular: