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How to Rate an Apple Analyst

NEW YORK ( TheStreet) -- There are few people on the planet that can destroy wealth faster than an Apple (AAPL - Get Report) analyst. With the release of a single, ill-timed, investor note, Apple stock can plummet 2-3%, wiping out $billions of shareholder value, not to mention the effect on futures and dozens of derivative stocks. By what right has such immense power been bestowed upon these people? If they had real talent, they'd be clawing for a spot on the brokerage sales desk, because that's where the real money is.

The fact is most analysts have very little investing or trading experience, and they do very little of the actual data collection and analysis. They are nothing more than glorified financial reporters. Of course this is my opinion, and I'm sure there's now a big fat bull's eye on my extensive forehead.

So, let's look at the facts. For this I'll turn to Philip Elmer-Dewitt of the Apple 2.0 blog, who has been compiling data on all the top professional and amateur Apple analysts over the past four years, which ranks them based on accuracy over specified periods. And the interesting thing is the data is all over the place. An exhaustive study would likely show that any analyst has an equal shot in any period of outranking the next.

At any time, an analyst might release a investor note that could affect Apple's price and in turn, your position...something you never figured into your analysis. So, consider that brokerages employ these spokespersons, who play reckless with our fortunes.

Let's consider the methods analysts use to compute the value of Apple. But before I get into their flawed methods, let me preface with the fact that most analysts covering Apple don't even use Apple products.

Ask yourself - how many times have you tried to make sense of an analyst's statement, where they've demonstrated a complete misunderstanding of Apple culture, the ecosystem, or the fan base. This isn't universal of course - some analysts are very knowledgeable and huge Apple fans, but even a respected Apple bull like Gene Munster ranks only in the middle of the pack, well behind several amateur analysts. Some of the most influential analysts rank near the bottom of the pack, like Charlie Wolf and Kathy Huberty.
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