One Tel Aviv Stock Exchange paper I hold and follow is Machteshim Agan Industries. It is the world largest generic agro chemical company, with annual sales of 1.7 billion $ and a valuation of 1 billion. 2005 profits were 200 million $ and about half was distributed as dividend. The company has put aside 150 million dollars for a buyback programme. The stock is traded in Tel Aviv at 23.50 shekel and lost 15% in the last three months.
The gradual falling of this paper is a mystery. in December, all the analysts recommended strong buying but around february, Deutsche Bank and later Merryl Linch changed attitudes and qualified Machteshim as a strong sale. The reason given was that the company was having difficulties in the Brazilian agricultural market, the real was revaluated, similar companies such as Dupont, Bayer, etc. were losing sales. The expectitive was that the 4th quarter report will be bad. People sold the paper for 4 dollar and less.
It was not. Sales in 2006 grew 15% and profit was an unprecedented 200 million dollar. The company was preparing itself to expand and buy other companies. But the damage done by the analysts was done, the stock is very cheap.
Why should analysts change directions on the basis of temporary loss of sales (1%) and say that because of that the company is 15% less valuable? Because the analysts have different interests from the investor, analysts get paid by brokerage firms to cause movement in the market - buying and selling. Investors should always bear in mind this truth, the analyst is not a friend, is a person that wants your money. Beware.
These contradictory recommendations caused that Machteshim is selling 15% lower than a couple of months ago and people is selling at loss.