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  • valenceluck valenceluck Jul 26, 2014 12:05 PM Flag

    Contrarian Indicator?

    "The Street" upgraded KBH from "Hold" to "Buy" yesterday, but the stock went down more after a big drop the day before. Is it a contrarian indicator? What a joke!

    Sentiment: Buy

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    • Analyst grading is next to meaningless. I think p/e triggers most re-gradings, so if a stock's price dives, it becomes a "buy" because its p/e ratio makes it look cheap according to trivial analysis. If it breaks out and surges higher, it gets downgraded to "hold" based on "valuation," because p/e has exceeded some artificial threshold. Price to earnings is calculated based on past earnings, whereas stock price is determined by the market's expectation of future earnings.

      Sentiment: Hold

 
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