I remember that in 2012, when I just opened my trading account with Philips, I made my trading decision more or less based on analyst's reports. I even all in Noble more than one time and eventually it tied up my entire capital for more than a year in 2013 (Heng I managed to escape the big drop!).
In fact, I rarely read analysts reports, unless it gave some industry's information. Recently when I was reading random financial news, I saw an interesting news. It is written in chinese, and happened in China.
https://www.jiemian.com/article/1793873.html
Basically the story is about got this listed company (Baoqianli, 600074), issued bonds to institutions in 2016, and can't even make their first interest payment on 30 November 2017. The market cap of this company is about 25 billion CNY, and the interest defaulted is only 72 million CNY..
The company got super high gross profit yield and net profit yield since 2015, however they got negative operational cash outflow since.. 2015.. and guess what, their bonds received AA- rating when they were issued! The biggest bond holder is China Minsheng Bank, which invested 200 million CNY for this bond!
I believed that a big bank like China Minsheng Bank got many financial talents working inside, and I also believed that the profit of the bank will eventually impact their salary and also their BONUS! However, they still spent so much on a bond issued by a company with more than 3 years negative operational cash outflow!
Other than the wrong investment decision made by bank financial talents, the rating professors also gave this bone AA- rating. Oh well.. and thie AA- rated bond defaulted their first coupon payment!
Even though this happened in China.. I guess we are able to learn from this story.. Do you still dare to trust analysts and make your investment decision based on their reports?
Thanks for reading.
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