No More Secrets

By Daniel Kadlec

You can't help marveling at Merrill Lynch star Internet analyst Henry Blodget. Bullish through a five-month bloodletting, he decided last week to downgrade his opinion on 11 onetime highflyers, including Doubleclick, eBay and eToys. In the case of eToys, the stock had dropped 95%. Losing any more, I suppose, would be just too much to bear. So Blodget stepped up with his gutsy downgrade while investors everywhere, in spirit, collectively asked, Who needs analysts anyway?

Wall Street's battalion of corporate sleuths has rarely been more in focus. Many of them make upwards of $1 million annually, some for doing little more than repeating the cheery stuff they hear over smoked salmon and white asparagus in the executive dining rooms of the companies they follow. They are so conflicted they almost never advise selling a stock, resorting to code to tip off clients when things aren't on track. For example, buy really means sell if the stock was previously rated a strong buy.

Confused? So was the Securities and Exchange Commission, which last Thursday set forth a rule designed to take the premium out of analysts' direct access to management. From now on, the SEC decreed, companies may not disclose material information to Wall Street--that means the analysts at mutual funds, institutions, and brokerages--without releasing the same information at the same time to the public via a press release, webcast or other means.

Hey, this is motherhood. You can't possibly be against it--a level playing field for you and the big shots. If the rule has the desired effect, you'll be invited to listen in on key conference calls and get e-mail when a company you've flagged files with regulators or issues a press release. As a side benefit, the rule promises to marginalize analysts living large solely on the access their position affords them. They may actually have to do some independent analysis.

That's asking too much, perhaps. The good-ole-boy network that puts the best IPOs in the hands of the best clients remains intact. In some cases the code will get even more indecipherable. And while the field levels, there may be less information overall as companies freak out over what they can say. Some 42% of companies polled say they will reduce communications to avoid running afoul of the new rule, reports the National Investor Relations Institute.

Still, most companies want to do the right thing. In the past, talking to analysts was the easiest and cheapest way to get the word out. Now they have the Internet. That means you too have to get on the Net to take advantage of the new rule, which takes effect in about 60 days. Make sure you have audio capability so you can plug in to conference calls. You won't get to ask questions, but you will hear what the analysts ask and how executives respond. Most online stock market sites give you fast access to company news. Check with any company you are tracking for a schedule of analyst calls. They are also listed on financial websites and at BestCalls.com which webcasts them without charge.

With such access, maybe next time Blodget or another analyst signals a sell, you'll have taken that action long ago--and be poised to scoop up a bargain.

See time.com/personal for more on fair disclosure. E-mail Dan at [email protected] See him Tues. on CNNfn at 12:20 p.m. E.T.