Every morning on the drive to work (at a red light of course) I check cnbc.com and look for who has moved in pre-market and after hours trading. Some nights/mornings a stock will be significantly different than the close price because of an actual reporting, however, more often than not, the change is based purely on an upgrade or downgrade by an investment firm following the company. In the past, I always just assumed that the negative downgrades mattered, I mean these are professionals! Don’t they know that the stock is going to go down or up whether it be because of market forces or sales? It then hit me, maybe any change is a good thing. An upgrade is obviously good, but at the same time maybe downgrades are a good thing too if I believe in the long term longevity of a the underlying company.
It is unbelievably hard to find long term upgrade/downgrade information. My guess is that there is absolutely no benefit to keep that information attainable – if the analysts were wrong in the long term it only undermines their ability to get paid to analyze. Of the stocks I did look up it seemed like JNJ had a rich history of upgrades and downgrades via yahoo finance. Focusing on the investment firm, Merrill Lynch, they had a handful of upgrades and downgrades on JNJ…again, according to yahoo finance:
I am sure ML had more to say about this storied stock, but I’ll be damned if I could find it! While I’ll be the first to admin these analyst reports do matter if your holding period is not 5, or 10 years, but if you buy it today and you feel like it is fairly (or even undervalued) does it really matter what the noise says?
It is impossible to compare to buying and selling at the upgrades and downgrades (and besides do we only listen to ML, or do we listen to the other 20 or 30 investment banks who probably have a position on a stock like JNJ), but PK at Don’t Quit Your Day Job has a fantastic dividend reinvestment calculator – putting just a $1,000 in 1998 (the farthest I have back on ML’s position on the stock):
I don’t know if I have a real answer on the topic, but it has provided me with something to think about.