These days, finding a good analyst is like trying to find a needle in a haystack. Or like being suddenly cast adrift from your trusted, newfangled electronic equipment, only to have to navigate your way by the stars to a safe and trusted harbor–it’s an easy way to miss the entrance and end up in a quagmire.
StarMine leads the way out of this predicament, which has all the signs of short-circuiting investor confidence for many moons to come.
A quagmire, in addition to its definition as a hazardous situation, is also a soft boggy or marshy area that gives way underfoot. I cannot think of a more apt description of the world of earnings estimates. Fiscal quarterly and yearly consensus earning estimates (the average of a pool of individual earnings estimates) are a driving force of the market, and the numbers, while easy to find (e.g., finance.yahoo.com), are not as much bogey as they are boggy.
Even the most sophisticated analyst or manager can get lost in the bog of individual estimates. How so? Earnings estimates are submitted by sell-side analysts at any time during the quarter. They may be revised and updated based on guidance from the company, or not. They can be calculated by seasoned analysts or fresh-faced kids straight from B-school with no real familiarity with the industry. They can be affected by a close relationship with the CFO, or a vacation or maternity leave, or the stripers running off the coast of Cape Cod on a great day for fishing. And naturally, they can also be affected by investment banking and other business relationships.
Thompson Financial, the company that supplies both First Call and I/B/E/S earnings estimates, is excellent at collecting all the data, but the delivery system leaves a lot to be desired. Most analysts and portfolio managers receive their estimates through third-party vendors who can package and spin the numbers for easier decoding. Premium vendor Factset Research Group leads the industry with sophisticated error-checking, screening, and reporting tools, but until recently, customization was a laborious process generally used by only the most fastidious of analysts.