Three research firms do the same thing on Wall Street every quarter. They collect analysts' estimates (called consensus estimates) from the same group of analysts from the same brokerage firms. These three firms are Thomson/First Call, Reuters Research/Multex, and Zack's. Occasionally these firms' consensus estimates differ but it is rare. We've posted two of them on this section of the site, Thomson/First Calls and Reuters Research/Multex. This is public information and available on many web sites.

Over the past 5 years, trends have emerged that have rendered these consensus estimates useless or insignificant too investors (both individual and institutional). From a research perspective they have little value. Here's why:

• Wall Street earnings analysis has been proven to be inaccurate. Few would argue this. Analysts, instead of being proactive when establishing earnings estimates, have become reactive. Rather then form their own opinion on a company's earnings prospects, they have chosen an easier path and now take direction from the public companies issuing guidance (whether truthful or misleading). Rather then forming their own research on the strength or weakness of a company they have to come rely on corporate reports or a corporate executives direction to form an 'estimate'. More importantly, the relationship they have with that company often provides the basis for a favorable opinion or an unfavorable opinion regardless of a company's fundamentals. It's not surprising that over 90% of the analyst coverage out there is positive, while less than 10% is negative. This statistic holds today and held throughout a three-year bear market (2000-2003) when stocks fell. And the analysts and brokerage firms that don't have relations with a company are usually trying to form one (or woo a client), so that analysis is almost always bullish or positive (again, regardless of the companies fundamental standing). This conflict of interest is only one of several reasons why analyst research and earnings estimates have lost credibility. It's the reason why the legendary and retired investor John Templeton has declared, "Wall Street is broken". Unfortunately there are no signs that it is changing.

• Stock movement no longer reacts to a company beating, meeting, or missing an analyst's estimate. It now reacts to the Public's (or Individual Investors) overall expectations on a company's earnings report. There are several reasons for this, which include the reasons stated above. The lack of credibility for analysts is now widely known. Investors still need to better understand Wall Street and the 'earnings game', but they are much more aware of it today than they were 5 to 10 years ago. More importantly with this awareness, individual investors have become a larger and more critical part of the market. They are now a bigger piece of the pie. Whether it's through individual holdings, an increase in daily trading activity, mutual funds, 401k's, etc, their expectations and sentiment are setting the tone for the market and corporate earnings. To some, this may be difficult or hard to understand. After all, the skeptics would argue, "what does an individual or even a sophisticated individual investor know about a company earnings report?" Well, it turns out they know a lot more if you put their expectations side by side with analysts. And that's what we (WhisperNumber.com) do everyday on this web site. Individual investor data has proven far more accurate and significant. Stocks are moving according to whether the company beats, meets or misses individual investor expectations, not the analysts. Facts don't lie, and there is no such thing as eight years worth of coincidence.

The Criminalization of Analysis
The naysayer to providers of expectations outside the 'mainstream' would say, "Aren't analysts at least trained to analyze companies? They are trained professionals, right?"

Wrong! The past few years have proven this. Analysts don't do their job well and in many documented cases not only are they unprofessional, they're criminal.

Some companies have tried to filter out the best analysts. A company called Starmine comes to mind in this category, but ultimately they are just regurgitating already flawed research (and their results show).

But there is better data out there. Many investors are aware of this and some are not. Unfortunately most of the mainstream financial media and press (the same media that pretends to chide and criticize the analysts) will often in the same report or right next to it, continue to cite, source, and bring credibility to analysts research. Thomson/First Call is the most quoted research provider (on a daily basis) in the Wall Street Journal, CNBC, Bloomberg television, and most other financial publications. Reuters now lists Multex or Reuter Research in just about every financial article they write about concerning earnings (one of their biggest topics). They're doing this knowing that the data is biased and flawed. We're not sure why. One thing we are sure of is it in no way helps you become a better investor.

WhisperNumber.com has and always will offer an alternative to analyst data. We may not be able to change the system (maybe it won't change) but we can continue to find and report better data. We hope you can utilize our research to become a better investor.

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More information on the meaningless estimates of analysts can be found in this related article.