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Kass: Many Analysts Should Get the Ax

Doug Kass

Wall Street apologists (a.k.a., sell-side research analysts) were out in full force defending Danaher (DHR Quote) when the company reduced fourth-quarter 2008 profit guidance after the close yesterday.

Their generally bullish analysis/recommendations and support of Danaher, as the share price of the company's common stock has dropped by 40% over the course of the last three months, is a constant reminder of how little value-added research emanates from Wall Street's corner. Despite the imposition of changes eight years ago by former Attorney General Spitzer, analysts still remain blinded by company relationships, preferring to take the role of cheerleaders in the process of conducting maintenance research rather than exhibiting truly independent and original analysis.

By now, I am no longer surprised by the almost value-destructive Wall Street analyst community, which has had little foresight of the uncertain economic futures for so many companies. So many of my short positions have been almost universally praised by analysts -- including Fastenal (FAST Quote), Henry Schein (HSIC Quote), Patterson Companies (PDCO Quote), Best Buy (BBY Quote), Lamar Advertising (LAMR Quote), and so on -- until the earnings reports profoundly disappointed.

I would be surprised, however, if, over the course of the next few months, a major Wall Street brokerage doesn't jettison its unprofitable research department and staff.

It would be no loss.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.

Know What You Own: At the time of publication, Doug Kass was short Danaher, Fastenal, Henry Schein and Patterson Companies as bearish dental industry plays. Another stock in the dental industry is Dentsply International (XRAY Quote). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.