Stock Analysts Too Scared of 'Sell' Ratings — or Too Stupid?

Among the long-running jokes to those of us watching Wall Street: Analysts almost never put an outright “sell” rating and recommendation on a stock.

Reasons are varied and obvious — including fears of being frozen out by a company or bawled out by a client.

Earlier this week, Reuters columnist Felix Salmon tackled the subject, after he had challenged me on some comments I had put out on Twitter.

But the level of stinginess with "sells" is pathetic and even surprising, especially as stock market races to post-crash highs.

How pathetic? I recently asked Factset to cull its database on sells in the S&P 500, and here are the result:

So far this year, with the S&P 500 at 1,337, a mere 338 of 10,557 rankings or 3.2 percent received outright sells. Another 191 or 1.81 percent received a ranking of “underweight,” which is the the politically correct equivalent of “sell.”

At this time last year, when arguably stocks were a better bargain with the S&P at around 1,208 — 4.15 percent of 9,141 rankings were sells and 1.65 percent underweight.

Now for the hammer: This time in 2009, with the S&P at a death-watch 843 — as the market was just crawling out of the depths of its depression — analysts had double the number of sells that they do now: 6.4 percent, with 3.74 percent underweights. It was the most negative they’ve been in years, and still a pathetically low number.

Goes to show: Not only are they stingy, but some (in retrospect, of course) look downright stupid.

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