We've talked a lot about why you want to pay attention to what Wall Street does, not what it says. Today we're going to tackle that subject again.
Why?
Because you've got another king-sized opportunity with Twitter stock, or at least that's what one analyst wants you to think.
Before I tell you what it is, though, I have to begin with a story that sets the stage. So grab a cup of your favorite libation and take a seat.
What you do next has a direct impact on your financial future.
Remember Enron?
Enron Fooled Analysts – and They've Been Blinded by Twitter, Too
Surprisingly, few investors remember Enron despite the fact that it's a famous tale of American greed, arrogance, and hubris that ranks right up there with the Big Banks today.
Starting from humble roots in 1985, the Houston-based energy, commodity, and services company rose to become one of Wall Street's darlings. Words like innovative, maverick-like, and ruthless were all uttered breathlessly in the media at the time as the stock dumped the old-line ways of traditional utility companies and shot to prominence as an energy “trader.”
At its peak, the company was worth $70 billion and shares traded at almost $90 each. And then it fell to Earth, ultimately ceasing operations in December 2001, when its shares didn't even rate penny-stock status.
“Another one bites the dust,” or something like that, goes the refrain.
What I want you to focus on is what Wall Street did as Enron tanked.
Traditional Wall Street analysts are paid to have opinions that are overwhelmingly bullish. Not only is this a cozy relationship for investment bankers and their clients, but it's helped Wall Street generate billions in commissions from a nervous investing public desperate for good news. Interestingly, this bullish predisposition is strongest at times when investors are not inclined to buy – like the present.
More than half of the 15 analysts following Enron rated the company a “Buy” or a “Strong Buy” as late as November 2001. Warburg and RBC Capital Markets downgraded the company a week later after it had fallen from $84.87 to $4.14.
