Tuesday, July 20, 2010

Bloggers vs. Pros Earnings Smack-down

Later this afternoon is Apple's earnings day. This is when all of us analysts earn our salary (haha sarcasm). To me, it's very important to keep track of my accuracy compared to other analysts not because I need to earn a salary, but because I simply need to get my modeling relatively right for my investment objectives to work.

So as I'm sure you know, PED does this earnings smack-down thing, pitting professional analysts against bloggers. Think of WWE, but better (without the predetermined outcomes). Lol ok, it's not nearly as exciting or entertaining, but it's as close as it will ever get in the investment analyst world. It's been a couple of years now, and it's been really fun. Thanks PED.

Go there and see the awesome table PED's meticulously crafted. I thought I'd try to get the revenue and EPS columns in some kind of visual form. So I went and calculated standard scores on everyone for revenue and EPS and ranked them all on the combined score. Then try to chart it, highlighting and contrasting the pro/blogger dimension. I came up with this (click to enlarge):

I decided to highlight the 3 most bullish and bearish professional analysts, and one of each extreme for the bloggers, as well as the mean for each group. I also highlighted Munster (because his EPS is so out of whack and I wanted to show that) since his combined score represents the median analyst (that is, if his revenue and EPS estimates actually cohered with the mid point of those two extremes). Oh, and myself, uh, because this is my blog.
If you ask me, this looks ugly. Ha. I don't know if I could've enlightened the data in a different way, but to me it's not a nice visualization of it. I couldn't think of anything else and the report is almost here, so there you have it.
Here's the raw data for the chart:

Analyst (ranked from most ----- z-scores ----
bearish to most bullish) Rev EPS Comb
-------------------------------------------- ----- ----- -----
1 Ben Reitzes, Barclay's Capital -1.31 -1.13 -1.22
2 Mathew Hoffman, Cowen & Co. -1.13 -1.09 -1.11
3 Tavis McCourt, Morgan Keegan -0.80 -1.28 -1.04
4 Keith Bachman, BMO Capital -1.31 -0.76 -1.04
5 Shaw Wu, Kauffman Bros. -1.31 -0.73 -1.02
6 Toni Sacconaghi, Bernstein Research -0.93 -0.91 -0.92
7 Doug Reid, Stifel Nicholaus -0.91 -0.80 -0.86
8 Kathryn Huberty, Morgan Stanley -0.58 -1.06 -0.82
9 Ralph Schackart, William Blair -0.64 -0.76 -0.70
10 Brian Marshall, Gleacher & Co. -1.13 -0.21 -0.67
11 Mark Moskowitz, J.P. Morgan -0.57 -0.69 -0.63
12 William Fearnley, Janney Capital -0.47 -0.54 -0.51
12.3 Professionals -0.42 -0.47 -0.45
13 Ashok Kumar, Rodman & Renshaw -0.04 -0.65 -0.35
14 Richard Gardner, Citigroup -0.04 -0.36 -0.20
15 Rajesh Ghai, Think Equity 0.29 -0.65 -0.18
16 Chris Whitmore, Deutsche Bank 0.07 -0.36 -0.15
17 Gene Munster, Piper Jaffray 0.87 -1.13 -0.13
18 Nehal Chokshi, Technology Insights 0.18 -0.43 -0.13
19 Mike Abramsky, RBC Capital 0.14 -0.36 -0.11
20 Vijay Rakesh, Sterne Agee -0.80 0.63 -0.08
21 Turley Muller, Financial Alchemist 0.05 0.19 0.12
22 Scott Craig, Merrill Lynch 0.00 0.45 0.22
23 Jeff Fidacaro, Susquehanna -0.24 1.26 0.51
24 Dennis Hildebrand, Apple's Gold -0.08 1.18 0.55
25 Yair Reiner, Oppenheimer 1.12 0.08 0.60
26 Andy Zaky, Bullish Cross 0.36 1.15 0.75
27 Alexis Cabot, Apple Finance Board 0.90 1.23 1.07
27.2 Bloggers 1.07 1.21 1.14
28 Daniel Tello, Deagol's AAPL Model 1.14 1.00 1.07
29 Horace Dediu, Asymco 0.73 1.55 1.14
30 Jeff Fosberg, Apple Finance Board 1.67 1.63 1.65
31 Robert Paul Leitao, Apple Finance Board 2.38 1.51 1.95
32 Nicolae Mihalache, Trader's Neighborhood 2.37 2.07 2.22

Good luck to everyone!


Anonymous said...


Help me understand this chart real quick. I'm having a hard time with it. You think they'll get $1.14/share revenue? Is this correct?



Daniel Tello said...

LOL no! My estimates for 3Q are $15.75b rev and $3.57 EPS. See here.

The values in the chart and table above are just standard scores (aka z-scores, z-values, normal scores), and represent how many standard deviations from the mean each analyst's estimates are. It's a relative measure, as compared to the whole group of estimates.

So, my 1.14 for revenue means I'm a bit more than one standard deviation (which is about $550m) higher than the average (which is about $15.1b) of all the estimates. Similarly, my 1.00 z-score for EPS means my estimate is exactly one standard deviation (about $0.27) higher than the mean (about $3.30) in this set of estimates.

On the chart, any positive z-value, above the zero-line, means that estimate is above consensus, and negative values, plotted below the line, means that estimate is below consensus. The Street's estimates (in red x's and +'s) are generally bearish but more homogeneous, not too dispersed (tunnel vision, group bias, whatever), with most z-values clumped around -1 to -0.5. Blogger's estimates (in green circles and squares) are generally bullish and much more disperse with the highest z-score at almost 2.5 (a possible outlier given the small sample size).

Not sure if this helps explain it? Maybe another commenter can explain it in clearer terms... anyone? Thanks for your question, and keep them coming.

Anonymous said...

Nailed it! Good for you. IB analysts are once again proven to be IDIOTS!

Anonymous said...

You got it spot on. Congrats!

Anonymous said...

Brilliant work. You're spot on.
Wonder how PED got Turley's numbers though; his site isn't updated for this quarter.

Anonymous said...

Deagol....your quarter to absolutely shine. Congrats!

Stephen said...

Congrats, you win! How did you do that? You're really working in Apple's finance department, right? ;-)

Daniel Tello said...

Anons #1 to #4, and Stephen, thanks for your supportive words.

Anon #3, I believe Turley emailed PED. Same with the other two new names, I suppose. I emailed him as well just in case he didn't catch my post.

Stephen, I think I'd hate having that job, since I wouldn't be able to do this publicly nor invest in AAPL as freely as I chose (although I guess the stock options compensation would.. uh, compensate for it haha).