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Check your sources

It has become formulaic that when a movie comes out one of the advertisements will feature reviewers comments like "riveting", or "one of the must see movies of the year" and of course my favorite "an instant classic". The point, obviously, of these reviews is to convince you, based on some other expert's testimony, that you need to see this movie.

Have you noticed though that over the last few years that the font on the source of the quote has gotten smaller and smaller? To the point now that on my 36 inch TV I would need a microscope to make out the author of the quotes in the advertisement for the new Sherlock Holmes movie. The reason for the ever shrinking font is equally simple, there are just so many people calling themselves experts out there that their is always someone at a media agency that will have found something good to say about a terrible movie.

Analyst downgrading/upgrading of stocks is the same. I have one stock in my portfolio with 40 analyst following it. Analysts like movie reviewers come in a varying degrees of credibility, so why would you buy or sell based off a change in view one may have of a stock in your portfolio? There are some analysts who's opinions I respect having listened to their questions to management on calls and having an understanding of their fund's investment philosophy. I treat their opinions like those of an acquaintance who tells me about a good movie they recently watched, it doesn't mean I will watch it, but I respect their opinions enough to hear them out- the others are just noise.

It never fails to perplex me how aggressive a stock price can move when an analyst recommends a sell or buy on a company's stock. By the way Sherlock Holmes was not "riveting".

This article was written by buyingvalue. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.