Ask Colin

Are brokers and magazines biased because they also have public company clients?

There are a couple of issues here. Broker research depends on information and advice from the companies. They can be ruthless in cutting off analysts that write adverse things about them. However, analysts are clever in getting around this. If they use the word "buy", you can usually believe them. Perhaps even the words "over-weight" or even "accumulate". However, anything less than "buy" usually means "sell". In particular run for cover if they say "hold" or "under-weight" or similar. More importantly, look at the facts they put forward and form your own opinion.

Magazines are a different thing. They have the same problems as brokers, so they tend to sit on the fence in poor situations. Journalists have more problem here than independents like myself. I do not rely on the companies for information, which is why I use the sell word. However, writers have another reason to avoid direct recommendations and that has to do with the laws on giving advice. You need to know your client before giving advice, even if you are licensed to give it. You cannot therefore give advice easily in a magazine. Magazine writers also often have to write to a theme from their editor.

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