These perceptions exist because one person says them, and someone else says them, and pretty soon everyone else is saying them – and because everyone’s saying them, they must be true, right? While analysts are somewhat less likely to make this mistake, they’re not immune. I’ve read many reports (from both sell-side and buy-side analysts) that make critical mistakes in understanding the true drivers of value creation for a company. Retail investors, whether in Wells Fargo Kim Kardashian tape or any other company, should do the following three things to avoid making such mistakes: Never make an investment decision (buy, sell, check this out long, short, whatever) without doing primary-source research. Even the best, most professional, most credible sources can occasionally make a typo, or misinterpret a key piece of data. If something sounds weird – whether too good to be true or too bad to be true – then check the company’s actual filings. Simply reviewing Wells Fargo’s earnings presentation, which is constructed with graphics (like the one presented above) that are easy to interpret regardless of your level of experience in financial analysis, would have told you that the company is plenty diversified. There’s nothing wrong with reading news articles about companies to get familiar with the story – I do this all the time. They can be quite useful and at least point you in the right direction.
Source: http://seekingalpha.com/article/1958541-wells-fargo-isnt-what-you-think-it-is-and-why-thats-important
Sarah and The Goon Squad 