In my harangue against sell-side analysts last week, I wrote, "The truth is that... research departments have become extensions of client PR departments. Too many analysts are just cheerleaders." I received a number of responses thanking me for telling the truth about this whispered issue, and this week I'd like to offer a more detailed breakdown of four species of analystus humanis.
Analystus Regurgitus (aka Regie)
A favorite of the corporate PR department, this species lurks in the background, avoids crowds, and hates confrontation. It never strays too far from its host company, feeding off the intentionally dropped scraps of information. Generally, this species comes from a good gene pool but suffers from chronic groupthink. Recent studies have identified the groupthink gene to be concentrated in the male species with no other dominant genetic traits. Early childhood patterns show a high likelihood of team sports over individual sports.
It is willing to do almost anything to remain anonymous and rarely offers an original perspective. Strangely though, Regie is known for an occasional insightful comment. These comments, which are hard to distinguish from those provided by analystus noblous, are now known to be the result of spending so much time around its host company rather than original research. When analystus regurgitus is born, it attaches to a company the same way ducklings attach themselves to the first thing they see. Often this blind faith is only broken when the mother company dies or is on its deathbed.
Scientists and the investment community have been trying to find a link between analystus regurgitus and an earlier species -- long thought to be extinct -- analystus parrotus. The remarkable ability of this creature to regurgitate ideas and viewpoints of its host company has astounded the scientific community for decades. A close cousin to analystus mimicus, it has no distinguishing marks or characteristics that make it easy to spot. Perhaps, this is why this is the most prevalent analyst species.
It flourishes in the urban environment around Manhattan and can be seen in several other large cities like San Francisco and Chicago where others of its kind offer camouflage and a sense of community. Regie has the longest life span of any analystus species due to its ability to adapt.
Analystus Niavus (aka Greenie)
This creature has the shortest lifespan of all the analyst species. It is also the only species to be raised in a pouch. Suckled all its life, it enters the world of high finance with unbridled enthusiasm and dreams of moving markets with deft knowledge of a company and its industry. This loyal creature by nature makes friends easily, has the work ethic of an Iowa farm boy, and is an independent thinker.
As it matures, it becomes discouraged after learning that hard work, intellectual capacity, and the golden rule don't hold the same value in its new world as they did on the Andy Griffith Show. After making attempts to adapt, this creature usually moves on to search for a more suitable line of work. It isn't uncommon to find Greenies scattered throughout the buy-side of the market. Greenies can also be found through the U.S. in various jobs, and migration patterns show a large, concentrated return to the Plains states where most of them were born.
Analystus Dramaticus (aka Vinnie)
Nobody is quite sure where this jittery creature got its nickname. Scientists have traced the migration patterns of analystus dramaticus for years and are still unable to find even the remotest hint of a logical pattern. Vinnie is thought to be related to analystus vulturus because it is usually one of the first of its kind on the scene.
An opportunist by nature, Vinnie is also one of the loudest analyst species and thereby visible to the general public. Over the years, investors have grown accustomed to its flamboyant and excitable nature. Like a pigeon in Central Park, New York City natives and those that understand its nature, simply ignore it. On the other hand, those that are impressed by its fast talk, flashy vocabulary, and debating skills are too often lulled into its world.
Constantly drawing attention to itself by spewing words and loud sounds, this creature is sometimes confused with analytus contrarian because it goes against the crowd occasionally. But scientists -- with the help of the world's top behaviorists, psychologists, and statisticians -- have determined that the percentage of times Vinnie guesses right is statistically insignificant. Investors are better off buying an index fund than buying the advice of analystus dramaticus.
Analystus Noblous (aka George)
Rarely spotted on the sell-side of the fence, this species has dwindled in number over the years. Once, the dominant of its kind, climate changes and mutant genes have all but wiped this environmentally friendly creature from the planet. A throwback to the time when financial markets were just forming, these creatures understand the importance of unbiased commentary.
Nicknamed after our country's first president for its integrity and honesty (think cherry tree), George is hard to spot but is occasionally written about in industry publications such as Fortune, The Wall Street Journal, and others. This specie gets in its fair share of scrapes with other analysts and superiors because its work makes the other species look intellectually dishonest.
Possessing a strong work ethic, uncompromising hunger for principles, and the ability to drown out opposing noise, analystus noblous is known for field trips and genuine research. She digs and claws her way to the truth with the single-minded purpose of spotting the mismanaged companies. Challenging questions and questioning corporate speak are two trademarks of this rare bird. Should you spot one on your investing safari, tag it and monitor its movements because the chances of finding another are slim.
Analysts are strange creatures. They come in all shapes and sizes, temperaments, and dispositions. A true Fool must develop a keen eye for distinguishing among their specie. Remember, if it looks, smells, and tastes funny, it's probably rotten.
Todd Lebor aspires to be an analystus noblous. This column is dedicated to Kristin, because she's a Fool's Fool. Todd's holdings can be found online, along with the Fool's complete disclosure policy. The Motley Fool is investors writing for investors.