1. Murky Research
Over the past year or two, research analysts have caught plenty of grief for holding onto buy ratings for dear life.
So what are they doing now? Why, they're changing their ratings more often than most people change underwear.
OK, OK, not everyone. Just Merrill Lynch analyst David Risinger.
And not on every stock. Just on
, on which Risinger reinstated coverage last month.
You see, as
pointed out Tuesday, Risinger this week changed his rating on the pharmaceutical conglomerate twice in one day.
OK, OK. That's stretching it a little bit. Actually, he changed it twice in less than three hours, as far as we can tell.
Our story starts innocently enough, back in Nov. 18, when Risinger launched coverage of Merck with a buy, citing his confidence in the company's 2003 targets and his belief that Merck would beat Wall Street's consensus estimates for earnings per share. Risinger puts a price target of $64 on Merck, which opened that morning at $55.88.
Fast-forward a scant 10 trading days to this past Tuesday, when Merck announces it will hold a call to discuss earnings guidance for 2003 on Thursday, Dec. 5 -- only five days ahead of the company's annual analysts' day.
So how does Risinger react to Tuesday's announcement of Thursday's forthcoming announcement? Why, he wavers. In a very big way. Citing Merck's year-earlier analysts' day, when lowered guidance apparently cast a pall over the stock, Risinger decided that if Merck was going out early with 2003 numbers, the numbers were going to be bad. "We are now concerned about EPS growth in 2003," Risinger wrote in a note that Briefing.com picked up at 11:30 a.m. EST. He cut his Merck rating down two notches, from buy to sell.
Talk about faith in one's convictions.
Merck's stock, already down from Monday's close of $59.58, falls even further, bottoming out at $55.18. Merck, mindful of the market anxiety exacerbated by Risinger's downgrade, issues a 12:25 press release reaffirming prior guidance for 2002 and 2003.
And lo, by 2:21, Merrill upgrades Merck -- but only one notch, to neutral. "We await the details of the financial outlook call," writes Risinger.
Here's the part where it gets both sad and funny. When Merck finally issues 2003 guidance on Thursday, it is indeed better than analysts' expectations. Risinger was right.
But Risinger -- whose firm has done recent banking for Merck, and who didn't return our phone call -- keeps his rating on the company, alluding to a few questions and uncertainties. Meanwhile, Merck's shares close out Thursday at $59.23.
We assume there are many lessons to be learned here, but we'll stick with one: If you see him at the Dec. 10 analysts' day, let him have an extra dessert. We're guessing he'll appreciate the comfort food.
2. Ear, There, Everywhere
Some people think the greatest threat to our language comes from high school seniors sleeping through English class. But we at the FDT lab blame another population.
Lazy students aren't the problem. No, it's energetic professionals. Specifically it's public relations executives who devise new words, or repeat them, in service of publicity for their firm's ventures.
Yes, that's how we ended up with such cursed coinages as "webinar," "infotainment" and "earballs," we suspect.
And now there's this week's monstrosity: "ear-con," found in a press release from the Starz Encore Group of
An "ear-con," apparently, is what people used to call a musical theme -- and still do. In its press release, Starz Encore gushes over its "new on-air graphics package and signature theme music," for the Starz! movie channel, created with the help of people like Elaine Cantwell and Danny Elfman.
As Liberty executive Che Che Mata says in the release, "We went after two of the best people in their respective fields to create a cool look and sound, so, with Cantwell's icon and Elfman's 'ear-con,' how can we go wrong?"
How about by putting out a press release?
3. DHB's Vested Interest
Speaking of tasteful press releases, we're big fans of the scribes at
Specifically, we're fans of the press release the company issued Monday in response to a Sunday press conference held by New York City Councilman Eric Gioia. The subject of the Sunday press conference? Bullet resistant body armor -- what's popularly but inaccurately referred to as "bulletproof vests" -- that DHB sold to the New York City Police Department.
On Sunday, Gioia alleged that DHB sold New York's Finest body armor with life-threatening defects. DHB says it didn't. (The NYPD says DHB is replacing 6,300 "questionable" vests, but won't specify why they're questionable.)
Whatever the ultimate truth is here, this is serious stuff. It's a life-or-death issue. So how did DHB get its point across Monday that it disagreed with Gioia?
Why, in a press release with this title: "DHB Industries Fires Back at NYC Councilman Eric Gioia."
Ahhh. "Fires Back." Interesting choice of words there. Yes, we're aware that "fires back" has a metaphorical meaning in the conversational sense. It's a perfectly innocent phrase.
And yet, and yet. We're not talking metaphors here. We're talking real bullets and real cops and real bullet resistant body armor here. Seems to us that "shoots back" is a little too close to the subject at hand to be used as a figure of speech.
Yeah, imagine a flight school advertising a "crash course" in aviation. That would be a close competitor to DHB in the Bad Taste Olympics.
DHB didn't respond to our invitation to discuss the company's wordplay.
4. Hughes and Abused
It seems like a million years ago that satellite companies
( GMH) first announced they would merge.
And that's a charitable underestimate of how sick we are of this long, drawn-out process.
So, after months of Hughes not merging with
, after months of Hughes wondering if it would merge with EchoStar, and after a year and a month of Hughes preparing to merge with EchoStar, what does everyone have to show for it?
Why, the prospect of years of litigation over the breakup fee that EchoStar may have to fork over to Hughes following the deal's expected failure.
Which is why we were gladdened by some recent commentary from Jeffrey Williams, managing editor of the trade publication
Satellite Business News
. As Williams' boss, Bob Scherman, reported Monday, Williams was a wee bit miffed at EchoStar for not supplying the press with a newsworthy federal filing the company had made last Wednesday.
Williams, wrote Scherman, "argued that after a year of covering this soap opera, not to mention the two years prior, it is the press that truly deserves the break-up fee for having to put up with this nonsense time and time again. Heck of an idea, huh?"
The smartest one we've heard all week.
5. Last One Out, Turn Off the Lights
Now, weren't we just saying that analysts had stopped hanging onto loser stocks like Velcro?
Exhibit A: On Tuesday, Prudential downgraded the reinsurance firm
Annuity and Life Re
from hold to sell, cutting the price target on the $2 stock from $9 to $1. "This may be late in the game," acknowledged the analyst on duty, who went from buy to hold in January, when Annuity and Life Re was around $20.
Exhibit B: On Thursday, after the feds declined to guarantee a loan for
, Deutsche Bank cut its rating on the air carrier from hold to sell. "This has not been a stock we have been recommending to clients," notes the analyst; Deutsche Bank has had a market perform or hold rating on UAL for more than two years -- since back when the shares were trading at $42.
The lesson here? You just can't win.