|Mogul,** NEW YORK (Dow Jones)--The sharp decline in long hyped e-commerce stocks in recent months was bound to spark a wave of recriminations. |
The sniping is getting personal at Silicon Investor, a stock-talk Web site primarily targeted at technology-stock investors, where a group of posters has made a target of Jamie Kiggen, an analyst at Credit Suisse First Boston, previously Donaldson Lufkin & Jennrette before the two houses merged.
The "Analysts Exposed - Jamie Kiggen (DLJ)" thread, started Monday night, has made it to the No. 2 spot on Silicon Investors' hot subjects list.
The thread's creator, who goes by the screen name "Donny Brasco," took issue with lofty, old Kiggen price targets for stocks like Yahoo! Inc. (YHOO) and Priceline.com Inc. (PCLN), which are now in the gutter. He sarcastically urged readers to "call to congratulate (Kiggen) on his successful targets."
His words apparently struck a chord.
"(Analysts) are simply put self-serving con men charlatans who live off of manipulating small investors using their CNBC type celebrity status," wrote a poster identifying himself as "Bernard Ng."
In fact in message boards across the major stock sites, individual investors have been voicing their anger with analysts like Mary Meeker at Morgan Stanley and Henry Blodget at Merrill Lynch, whose stars rose along with stock prices of the Internet companies they once plugged and now disdain.
On Raging Bull's Yahoo! Inc. message board, "Rudeboyelvis" wrote this of Blodget, who recently made negative comments about the company: "This is the same jack--- who was bullish on Yahoo at 115 2 months ago.... The dot coms didn't just all of a sudden die in the past 6 weeks, what happened?"
On Silicon Investor and The Motley fool there are multiple message boards dedicated to discussing analysts and their analysis, but none has received the traffic of Silicon Investors' Kiggen board.
Singling out Kiggen is unfair, argued Michael G. Thompson, co-president of BulldogResearch.com, a Web site that ranks analysts based on the accuracy of their earnings predictions. "He's one of the better (e-commerce) analysts, and unfortunately the sector has really gotten crushed." Kiggen is the recipient of Bulldog earnings estimate accuracy awards for a large number of companies.
Kiggen did not return calls for comment. Blodget and Meeker weren't immediately available for comment.
Primary blame for the decline in e-commerce stocks should be placed with company managements, Thompson says. "Clearly e-commerce companies have failed to deliver on some of their promises." Where analysts erred was in relying too heavily on the companies for information and in getting caught up in the enthusiasm as the stocks reached dizzying heights.
Focused On Return, Not Risk
The notion that analysts are to blame for investors' losses is "poor sportsmanship," said Thompson. Investors tended to focus on return and ignore risk, despite the clearly volatile and risky nature of investing in the Internet.
Furthermore, investors cannot be absolved of responsibility for informing themselves about well-known sell-side analyst biases, said Chuck Hill, director of research at First Call. "If individual investors are going to play in the marketplace, unfortunately, they need to be able to decode what the recommendations mean."
Analysts tend to have an extreme positive bias toward the companies they cover, because pressure can be exerted by the investment banking side of a firm's business, which may be doing or want to do deals with the companies, and analysts may fear negative calls would hurt their relationships with company officials. Less then 1% of the recommendations logged by First Call are sell or strong sell ratings, while 75% are buy or strong buys, he said.
With that reality in mind, investors should "move everything over one notch." If an analyst says buy, they're really neutral; if they say they're neutral, sell is the real message, Hill said.
Clearly though, plenty of average investors took the recommendations of high-profile equity analysts at face value.
"I relied upon the recommendations and bought them all," wrote a poster named "BWAC" on the Silicon Investor Kiggen board. "I perceived them to be a professional advisor. One who was in the business of advising others, one with special skills above my own, one in the know, a professional, knowledgeable, one to be relied upon, experts on the subject. I just don't understand what happened."