FOOL ON THE HILL
The Analyst Pledge Exposed

Ever wonder why Wall Street analysts seem to move together on a company AFTER it releases bad news? Well, the conspiracy theorists are on to something: There really is a pact among the analysts. In a major coup, Bill Mann has acquired the text of a secret oath administered to all analysts before they are allowed to cover companies.

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By Bill Mann (TMF Otter)
January 31, 2001

As a candidate for the office of Wall Street Sell-Side Analyst, I, [state your name], do hereby affirm, declare, promise, and swear that:

  1. I will expunge the word "sell" from my vocabulary, replacing it with the word "hold."

  2. I will torture the English language to within an inch of its life, so that I can say "Nobody expected Procter & Gamble (NYSE: PG) to meet expectations," without acknowledging either the paradox, or the fact, that everyone was wrong when P&G actually did meet expectations.

  3. I will say the words "Chinese Wall" without giggling.

  4. I will pretend to feel entitled to all that money coming my way.

  5. I will retain a rating of "strong buy" on a company like Internet Capital Group (Nasdaq: ICGE) as it slips from $212 to $5 per share, and only then will I decrease it to "buy."

  6. I will not explain how I expect someone to "accumulate" a stock without buying it.

  7. I will pretend to ignore that my analysis is designed to attract investment banking business to my company.

  8. I will cover all companies that my employer has taken through a public offering with a "strong buy" immediately after those stupid SEC limits expire.

  9. Rather than reduce the rating on those companies for which I have a "strong buy," I will reduce the target price.

  10. If I can't say anything nice about a company, I won't say anything at all.

  11. I will only say "You can't time the market" when I have been dead wrong about a company, for example, when I have my highest rating on a company that has recently filed Chapter 11.

  12. I will vigorously defend my employer's best clients from any outside force that threatens them, including, but not limited to: other analysts, Jim Cramer, God, The Motley Fool, the truth, reality, cash flow problems, newts, global warfare, competition, economic reality, Alan Greenspan, Alan Alda, Albania, taxes, earnings, deficits, or the Dow Chemical Corp. (NYSE: DOW).

  13. I will not call the SEC "the Great Satan," except in the most discreet of situations.

  14. Whenever a company does surpass my price target, I will respond by releasing a new, higher target.

  15. I will not let archaic concepts like "negative cash flow" get in the way of a good opportunity to pump up the stock of a client company.

  16. I promise to practice my "deer in the headlights" gaze for those situations in which a skeptic infidel like CNBC's Mark Haines asks me why my coverage list and my company's client list bear remarkable similarities. Where this fails, I should learn to say "I like eToys' (Nasdaq: ETYS) prospects" with a straight face and a clear conscience.

  17. I will remove any quaint notion of "accountability to shareholders and individual investors" from my value system. A man cannot serve two masters, and neither can I.

  18. Whenever I am on a conference call with a company, I must open my question with "Congratulations on a great quarter," even if it wasn't.

  19. I will never, ever pass up a media opportunity, and I will never let one pass without mentioning a stock my company is trying to sell out of its inventory.

  20. When news comes out about a company that is too bad to ignore, I will respond by lowering my rating down to "buy," only after the news comes out, and only if other analysts drop their ratings as well. I will call this "value-added research."

  21. Most importantly, I will never, ever reveal the existence of this oath, so long as I live, on pain of having to work for a living.

To this I pledge my sacred honor, and the title to my beach house in Bridgehampton.

Signed:

____________________
Your Name Here

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Bill Mann knows how to say "ashtray" in Russian. At the time of writing, he held a position in Procter & Gamble. To view his other holdings, visit his profile. The Motley Fool is investors writing for investors.