The value of street consensus:

I notice that on BNN’s popular Market Call shows there is a growing tendency for the callers to ask the host for the “street consensus” in addition to the guest opinion on a particular company. The problem is the street consensus is usually a “buy”, a “hold” and rarely a “sell”.

In the new investing book - Market Masters (ECW Press, by Robin Speziale, I state on page 388 “the problem with fundamentals is that the fundamental analyst isn’t going to know anything about jewellery stores by going to the annual meeting. He needs to have actually worked in a jewellery store to understand the real story. Take a stock like Auto Canada, which everybody loved for a while. When I was in Ryerson, to pay my tuition I worked at a GM dealer selling cars. Also, I worked as an apprentice mechanic. So I

was at the back end of a dealer and at the front of it. I knew how complicated a dealership is: you’ve got new cars coming in, you’re dealing with trade-ins, you’re dealing with mechanics, you’re dealing with the union, you’re dealing with sales and marketing, you’re dealing with the workers’ compensation. You’ve got so much going on, so the only people who can run a dealership is the owner who is an entrepreneur.

And why would a dealership ever go up for sale? It’s because the owner can’t take it anymore and wants to get out. So he’s going to unload it to AutoCanada. Well, good luck with that..”

A recent tweet by BNN’s Frances Horodelski was refreshing – “In April 2014, 80% of the analysts that followed $BTU rated it a #Buy.  Today, company files for Chapter 11

$BTU refers to NYSE listed Peabody Energy (BTU) which is displayed in our weekly bar chart – spanning about three years. Note circled April 2014 period that Horodelski refers to at the $250 price level and the subsequent decline to the $2 level. I wonder how many analysts rated Valeant a “buy” or “hold” a year ago?