What research sources does the analyst cite?
Does the analyst quote the federal government or industry trade groups to support her thesis? These sources are important because they help to give a more complete picture regarding the company’s prospects for success. Imagine that you decide on the stock of a strong company. But what if the federal government (through agencies such as the SEC) is penalizing the company for fraudulent activity? Or what if the company’s industry is shrinking or has ceased to grow (making it tougher for the company to continue growing)? The astute investor looks at a variety of sources before buying stock. • If the analyst cites a target price for the stock (“We think the stock will hit $100 per share within 12 months”), does she present a rational model, such as basing the share price on a projected price/earnings ratio? The analyst must be able to provide a logical scenario about why the stock has a good chance of achieving the cited target price within the time frame mentioned. You may not necessarily
