Some argue that the total number of stocks covered by Wall Street analysts is shrinking at an alarming rate. SmartMoney put out an interesting article
underlining this fact, illustrating that the total stocks covered today is quite small compared to a few years ago.
To make the comparison more relevant, SmartMoney shows that in 2000 there were more than 7,600 firms that captured the attention of at least three analysts. Since then, the number has fallen dramatically down to below 6,000 such companies. This change could be explained in part by the fact that analysts prefer to analyze big companies which show potential for a further development.
This logic is quite simple, as every investor would rather invest in a more reliable company rather than a small one that could turn into a nightmare. Another factor that determines analysts' decision to cover the bigger companies is the fact that the bigger companies tend to have more news available that the analysts can use to discuss the companies new developments that attract investor attention. However, limiting the decision of which stocks to cover to these criteria could leave out many potentially attractive stocks for investors to consider.
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