There are hundreds of reports published daily by analysts from domestic securities firms. When looking at target prices set based on the price-to-earnings ratio (PER, market capitalization ÷ net income) or the price-to-book ratio (PBR, market capitalization ÷ net worth), investors are bound to feel excited.
But is this all there is? An analysis suggests that the real key of domestic analyst reports lies in the tone and the nuances hidden between the lines.
Bang In-seong, a researcher at Eugene Securities, said in a recent report that "changes in analyst sentiment reflect expectations regarding future corporate performance and sectors, influencing stock prices."
Existing quantitative analyses have primarily been based on financial factors of corporations. Analysts' psychology has been perceived as a subjective element of expectations and has not been regarded as highly important. However, with the rapid advancement of large language models (LLMs), text data can now be finely quantified.
Morgan Stanley Capital International (MSCI), the world's largest index provider, also presents related indices, including the MSCI Analyst Sentiment Index.
Bang noted that "the MSCI's quantification of analyst sentiment systematically quantifies market expectations, reflecting psychological changes that are not captured by existing indicators," and added that "positive changes in analysts' sentiment have shown to outperform the market in both the short and long term."
However, in Korea, there is a structural characteristic where analysts' investment opinions tend to be biased towards 'buy'. In the five years since 2020, 93.1% of analysts' investment opinions have been 'buy', which is a sharper concentration than 67.3% in the 2000s and 89.6% in the 2010s.
To compensate for these limitations, it is essential to look at what analysts truly intend to convey. Bang assessed the positive and negative ratios of analysts using the FinBERT model, which is mainly utilized for sentiment analysis of financial texts.
Based on this, it has been shown that stocks with high positive ratios from analysts also have higher revenues. There appears to be some correlation.
According to Bang, last week, the stocks with a positive ratio exceeding 40% included Samsung Electro-Mechanics, Amorepacific, Humedix, Hansol Paper, Dongwon Industries, SeAH Besteel Holdings, Samsung SDI, GC Green Cross, Hyundai Corporation, Chong Kun Dang, and Taihan Cable & Solution. These stocks rose an average of 5.1%, achieving excess returns compared to the KOSPI index's increase rate of 2.9% in the same period.
This week, there are also stocks positively evaluated by analysts. According to Bang, these include LG Uplus, KT&G, VM, PharmaResearch, CS WIND, d'Alba Global, Dongwon Industries, NEOWIZ, ECOPRO BM, Daeduck Electronics, Korean Air, Contentree JoongAng, NAVER, Hanwha Vision, Samsung Securities, and C&C International.
Of course, just because an analyst has a favorable view does not mean the stock price will necessarily rise. Conversely, there are stocks that achieve 'surprise performance' contrary to analysts' low expectations. However, it seems clear that in an era where numerous 'experts' give their opinions, it is essential not to easily lean towards them but to develop the ability to read their hidden meanings well.