here, sydneybound.
back in 2001/02 GS were so keen to switch from the absolute to relative ratings, and now it's full circle back to absolute! oh well...
Goldman shake-up bans fence-sitters
By Chris Hughes in London
Published: June 25 2006 22:08 | Last updated: June 25 2006 22:08
Goldman Sachs has become the latest investment bank to attempt to prod its equity analysts off the fence by banning �outperform� and �underperform� stock recommendations.
It is now insisting on unambiguous �buy� and �sell� tips for which its number-crunchers will be held accountable. The tougher stance is part of a shake-up of the investment bank�s equity research in which Goldman will roll out what it dubs �Action� research globally from Monday.
Goldman analysts will be obliged to set price targets for all the companies they cover, with stocks to be rated �buy�, �neutral� or �sell�, instead of �outperform�, �in-line� or �underperform�. If analysts subsequently change their recommendation, they will have to publish an evaluation of their tip � however well or badly it has faired.
In an attempt to drive greater accountability, the Action notes will require analysts to state on one page why they believe the market has mispriced a stock and identify a catalyst to move it to the target price within a forecast time frame.
The return to a rating system in plainer English means Goldman falls in line with rival Merrill Lynch but distances its research from its peers. Morgan Stanley and JPMorgan recommend investors go �overweight�, �underweight� or �equal weight�/�neutral�, while Credit Suisse uses �outperform�, �neutral� or �underperform�.
Hard �buy� and �sell� calls appeal to hedge funds and other investors trying to deliver absolute not relative returns, which account for 40 per cent of daily trading commissions.
Goldman said the new format was not tailored specifically for hedge fund clients, but all �performance-driven� fund managers.