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Vertex Pharmaceuticals Incorporated Message Board

  • swhitemd50 swhitemd50 Sep 18, 2011 4:18 PM Flag

    Conflicting opinions and estimates

    Anyone trying to research Vertex is going to be completely confused by the conflicting opinions and estimates from the analysts. Fidelity Investments research web site provides a summary of analyst opinions it calls the equity summary score using a 1 to 10 scale. Last month it had Vertex rated 1.1 (very bearish) and now it has improved to 2 (bearish.) Fidelity's top rated analyst, EVA Dimensions (StarMine Relative Accuracy Score of 100 out of 100), report from 9/16/11 gives Vertex its lowest rating (Sell.) Of course, nearly the whole EVA Dimensions report is based on backward looking data. Interestingly, Fidelity owns 21% of the company (43 million shares) as an institutional holder and mutual fund company. When I asked my Fidelity advisor about this, he said that because of the massive amount of money that Fidelity has to invest, it is going to own a lot of shares of any big biotech company. However, when I looked at other big biotech companies ownership, it became clear that Fidelity picks and chooses which ones to be invested in. When I asked my Fidelity advisor if he could tell me the opinion of Fidelity Investments own (in house) analyst covering Vertex, he told me he could not disclose that information.

    Another significant discrepancy I have seen is the long term growth (LTG) rate for Vertex. If you check the Yahoo Finance analyst estimates page, the 5 year growth rate is estimated to be about 3%. I have trouble believing this 3% figure with everything Vertex has going for it. Perhaps this is a backward looking figure. But if this were accurate, then Vertex would deserve its low forward PE multiple of about 12 for 2012. The only other estimate I could find for LTG was in the Thomas Reuters analyst report from 9/16/11 which gives Vertex a forward PE of 15.6, a LTG of 81.9% and a PEG of 0.2. I guess it all depends on how successful one thinks Vertex will be selling Incivek and bringing new drugs to market.

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    • Very few mutual fund companies will ever disclose what their own internal investment analysts think, nor should you expect it.

    • Fidelity does not have a research department of its own to advise brokerage customers about stocks, etc. Any internal research is done via their various mutual funds for their own use only.

      Fidelity does provide a lot of third party research (95% of them worthless). I have had an account with them for many years and am familiar with the research they have provided over these years. The only worthwhile research they NOW provide is the "S&P's Equity Research Report" for MAJOR stocks. However, the S&P also provides another report called "S&P's Compustat Company report" for some of the smaller stocks which is also worthless for those who are looking for recommendations.

      If you look at Fidelity's 3rd party reports other that S&P Equity Report you wont see any reference to any products in development or any analysis of the product a company is selling now. As someone else said they are sticktly looking at the financials and past data.

      They used to provide two additional stock analysis, one by ARGUS RESEARCH which did product analysis and was very good. The other good research reports was those provided by Lehman Brothers. Lehman, however, discontinued their research contract with Fidelity (they probably were not getting paid much)a year or so before they went bust.

      BTW, if you read most of these worthless reports, they sound like they are generated by computers without any human judgement or analysis involment.

      Also I have expressed the scancity of good research to the Fidelity Managment and suggested that they pay whatever money it takes to get reports from some of the big wall street firms such as JPM, Citigroup, Oppenheimer, etc. I have receive polite responses that indicate how seriously they value my opinion, blah, blah. At the end they say we will bring your concerns to the attention of the companies that provides us with research reports (the same worthless companies that I have complained about). Big deal!!

    • At the end of the day, all the research in the world still comes down to predicting the future.

      Also you have to remember that analysts covering any stock publish opinions that are not free of motive. That is to say, who has a position, who wants one, and who wants out. So never assume opinions of analysts are completely altruistic in nature. Opinions come in three types, published, private, and ignorant.

      For me I look at Vertex and I look at % ownership, in other words who owns it and who doesn't. That tells me all I need to know, and that being long Vertex is a really good idea right now.

    • The problem is you don't know what Fidelity's methodology (formula) is. It's probably tied to earnings somehow and Vertex doesn't have any.

      On your second point at Yahoo, it's kind of the same thing. I don't know what those numbers mean. You cite the 3% for 5 years but they also list 452% for next year. That alone would make the 5 year growth rate a lot more than 3% even if they were flat after the first year.

 
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