Ever wondered how those stock picks from the Wall St. Investment banks play out? Our friends over at the Visual Capitalist1 looked at data gathered by InterTrader2 and dug under the covers and tracked the stocks that the Investment Banks had recommended over different holding periods in order to gauge their success rate and returns. For this particular exercise, 2015’s recommendations were used.
Overall, the recommendations when held through year end were determined to be only 43% accurate with a return of -4.79%. A meager 6 out of 16 banks that were reviewed saw their batting average exceed 50% or greater. In terms of performance, the highest return was +3.4% while the lowest was -16%. Within the recommendations there were some stocks that were positive and some that lost value. Of the 16 banks, only 2 had positive returns on their recommendations assuming that you had purchased every recommendation at the time it was made and held it through the end of 2015.
The chart below shows the returns for collectively holding every recommendation from the 16 Investment Banks, the S&P 500 and earning 3% in an account.
Source: Visual Capitalist and Intertrader
There are many factors that go into an Analyst’s rating on a stock and while one year doesn’t make a trend, we thought it was interesting to point out. Remember to be diligent and know what you own and why you own it.
