Wall Street had 50 company recommendations for their take on APPLE stock prior to AAPL's announcement of earnings after the close of market on April 26, 2016. Of the 50 recommendations, 44 were BUYS. 4 were HOLDS and 2 were SELLS. Our models told us a different story. We recommended for the month of April and heading into earnings to short the stock at $108.99/share in our Income Producing Model. We covered the last day of April at $93.17/share.
Not that much of a profit when you think about it. Approximately 15% over four weeks. But, one didn't take the 15% hit by owning AAPL shares into earnings. So, one could look at it as a 30% swing relative to taking advice from some other firm. We've told you what we do in the previous article. We can tell you what we don't do here. We don't listen to other's recommendations. It wouldn't make any sense.
These are the very same firms that come out with a downgrade after a company announces an earnings miss or any other unanticipated company news. Example: On September 15, 2016 NVAX shares closed the trading day at $8.34/share. The following day, the shares of the biotech company closed at $1.29 (an 84.5% drop due to test data from the Resolve Phase 3 trial not meeting efficacy objectives previously set).
Two well-known investment bank/asset management firms announced the next afternoon (September 16, 2016) that they were now downgrading their rating on the stock from Overweight to Neutral. With one changing their price target from $14.00/share to a new target of $1.00/share. It should go without mentioning, but we will anyways; This after-the-move analysis is worthless to all investors involved.
As a side note, for anyone who has not seen the film: The Big Short, it is definitely worth two hours of your time.