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Why so bullish for Blackstone?

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TEXT OF STORY

Doug Krizner: Guess what's back on the radar screen? Possible conflicts of interest involving stock analysts. When the companies they're recommending happen to be important clients of the investment banks they're working for. Marketplace's Bob Moon has the latest case in point.


Bob Moon: Never mind that Blackstone has been one of the year's worst performing initial public offerings or that tighter credit markets are threatening the private equity giants.

Several top Wall Street firms have just started analyst coverage of Blackstone — most of them banks with a vested interest as underwriters of the IPO.

And how do they rate the slumping stock? Wait for it . . . . [ drumroll ]

Almost universally, they recommend . . . you buy.

A conflict-of-interest settlement four years ago allowed the banks to keep issuing their own recommendations, and at the University of Pennsylvania, professor Marshall Blume doubts much has changed.

Marshall Blume: It really hasn't had much impact on the quality of research or the objectivity of it.

Blume thinks analyst ratings aren't worth much, anyway, since most big institutional investors buy their own research.

Blume: You only make money, really, in the stock market by obtaining some information prior to it being available everywhere in the world.

By the time the rest of us hear an analyst's buy or sell rating, independent or not, Blume says it's almost certainly already priced into a stock.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.
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