The Five Dumbest Things on Wall Street This Week

1. SBC Clearly Now the Rain Has Gone

We at the Five Dumbest Things Research Lab can't find it in ourselves to get outraged over the latest example of a Wall Street analyst privately believing one thing and publicly stating another.

Ham-Handed Research

Maybe we were mellowed by the research lab's annual beer bash. Or maybe we're just sick of it all.

This fresh illustration of What Hath Blodget Wrought comes courtesy of the National Association of Securities Dealers, which this week said it suspended Andrew Hamerling, formerly a telecom analyst at Banc of America Securities.

While the NASD came up with several cases in which Hamerling's published research was materially different from unpublished opinions, we'll focus on just one stock: SBC Communications (SBC Quote - Cramer on SBC - Stock Picks), upon which Hamerling initiated coverage in February 2001.

From his first report on SBC to his last, notes the NASD, Hamerling had a buy rating on the stock. Though Hamerling lowered his target price for the stock on several occasions, that target was always above wherever SBC traded at the time. In other words, Hamerling's research said, "Up, up, up."

Yet privately Hamerling's forecast for the stock was down, down, down, according to findings that the NASD published this week. "Short SBC," he advised one hedge fund manager in September 2001. "It has nothing fundamentally sound going for it..."

Within a week, he emailed another hedge fund, "I'd short a lot of SBC ... the company is clearly overvalued and has to lower its growth rates materially going forward."

Yet despite this apparent egregious dishonesty, we feel a twinge of sympathy for Hamerling. Reason one: A report he issued the same week of those emails did, in fact, raise one bold-faced question about SBC's future: "Overall line growth trends leave us wary about SBC and the Bells' growth prospects going forward," wrote Hamerling, though it was right next to that bold-faced "buy" rating and the $51 price target (implying 15% price appreciation).

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