Why Do Not Financial Analysts Make More Money?

IT IS THE BUSINESS OF THE FINANCIAL ANALYST to criticize, to weigh, and to judge the corporations of America. It is about time he turned a little of this shining light of criticism and appraisal on his own activities, or at least on that major segment of them involved with industrial common stocks. So many data are available about the fortunes that have been made possible by investing in the really right stocks, not only at the right time but at almost, though not quite, any time, that it seems pointless to labor it here. Everyone knows the staggering returns that could be made within a span of 15, 10, 5 or at times even 2 years by commitments in not just a Dow Chemical, a Minnesota Mining, a Food Machinery, or a Lion Oil, but in literally dozens and dozens of similar stocks. In contrast, we all know many stocks that in the face of the expanding economy and all the inflation of the last fifteen years have not even risen enough in price to balance the declining purchasing power of the dollar. This is the field the analyst works in. Either he can master it or he can't. But, if he can, with the fortunes that he should make available for those listening to his golden advice, how can he fail to command fees that should make his one of the most financially rewarding occupations in the Nation? With the investment of the surplus of these huge fees (even after allowing for our old friend the Federal income tax), how can he fail to reap even more of a golden harvest? Look at the analysts around you. Although few of them are living in downright squalor, most do not seem quite so financially well off as should be warranted by taking full advantage of the unusual field in which they are working. Therefore, should we conclude that ( 1) analysts are a bunch of dumbbells, or (2) it is impossible to do what most of them are attempting, which is possibly a polite way of saying they are a bunch of charlatans, or (3) there are fundamental errors in the methods of approach used by sizable numbers of them, which errors of method prevent them from accomplishing the results that their basic intelligence would otherwise attain?