Analysts fail the acid test


THEY have huge salaries and their opinions might strike fear into captains of industry, but it seems the City's army of analysts is, on balance, a waste of money.

This damning verdict emerges in the latest survey of analysts' forecasting skills published today by, the financial information website.

It surveyed recommendations from the City's leadings analysts over the past five years and found that they had 'consistently failed to predict correctly the performance of shares in the FTSE 100'.

The findings will further fuel the debate over the value of the City's experts, famously dismissed as 'teenage scribblers' by Nigel Lawson when he was the Tory Chancellor in the Eighties.

Equity analysts, who recommend the buying or selling of shares, can command salaries of £70,000, soaring to well over £100,000 after bonuses. A handful of star analysts earn more than £1m a year.

DigitalLook traced the recommendations of top analysts since 1999, the height of the boom, to the present day. It found that, on average, they had failed to spot either the highs or the lows of the stock market.

At the end of 1999, the number of buy recommendations outnumbered those to sell by ten to one. Yet the market plunged 20% in the following two years and started to recover only in spring 2003.

Even then, analysts got it wrong. In March last year, as the stock market hit its lowest level for almost eight years, buy recommendations outnumbered those to sell by just three to one. The market has since gained 27%.

Andy Yates, director of DigitalLook, said: 'City analysts are paid relatively large amounts of money to get their recommendations right.

'While many do, the industry needs to work harder to ensure it is giving investors credible advice rather than just sticking out another buy note.'

Analysts fail the acid test

Search within