As companies go bankrupt, analysts say 'hold'

By Deepa Seetharaman-Analysis

NEW YORK (Reuters) - Two days after Circuit City Stores Inc (CCTYQ.PK) went belly up last week, nine of its 14 analysts rated the electronics retailer a "hold."

Most analysts also rated Lehman Brothers' a "hold" a day after the investment bank filed for Chapter 11 bankruptcy protection. On the day in September that Washington Mutual became the biggest bank failure in U.S. history, one analyst still thought it was a "buy."

And just two of the 14 analysts covering Citigroup Inc (C.N) rated it a "sell" or a "strong sell" on Wednesday, on a day the bank's shares plunged 23 percent.

These snapshots, culled from Thomson Reuters and StarMine data, shows how far behind the curve analyst ratings have often been during what is probably the worst financial crisis since the Second World War.

Despite some bold statements, such as Deutsche Bank AG (DBKGn.DE) saying it thought General Motors Corp's GM.N shares were worth nothing last week, analyst calls usually lag the news, not the other way around.

"Analysts are doing their research and they come up with conclusions the market has already come to," said Michael Cuggino, portfolio manager for Permanent Portfolio Funds in San Francisco, which oversees $3.2 billion (2.15 billion pounds).

"GM is a perfect example of that. If you look at the preponderance of negative news, it's sort of like they stated the obvious."

Troubling news on Circuit City, Lehman and Washington Mutual also percolated for days before they failed. In such cases, common stock shareholders are often wiped out with no hope for recovery.