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Forest City stock seen as bargain by investment analysts from firms that have a business relationship with the company

A 2/7/12 article in Barron's, Forest City Has Room to Grow, suggests that Forest City Enterprises, after divesting itself of the volatile land business and making its board more independent, may do better with investors, especially since it's relatively cheap.

The changes didn't spring from the ever-reformist Ratner extended family. Rather, as Barron's reported:
Many of the changes came after suggestions from existing investors, including Third Avenue Management, the asset-management firm that is the single largest outside shareholder with nearly 20 million shares.
Compromised advisors?

Barron's points out something I hadn't noticed. The investment firms tracking Forest City, whose representatives always seem so chummy with the developer during conference calls, do business with the company.

Doesn't that compromise some of their previously bullish advice? Why weren't they warning investors not to put their money into Forest City if it didn't pursue reforms?

Barron's reports:
"It's a company with a high-quality portfolio of properties that's taking a number of positive steps now," says Sheila McGrath, who covers the real-estate sector at Keefe Bruyette & Woods. "We think being able to get a real-estate company trading at such a discount to net asset value (or NAV) is a terrific opportunity."
It adds:
KBW has an Outperform rating and an $18 price target on shares of Forest City. The company has been a client of the firm in the last 12 months, and KBW expects to seek investment banking income from the company in the coming three months.
OK, but KBW is not exactly clairvoyant. Last June, KBW similarly offered an Outperform rating, with a $23 price target on shares of Forest City Enterprises Inc. But the stock never topped $19, and proceeded to dip. It has since risen over $15.

Similarly, BMO Capital Partners calles Forest City's stock "a top pick on valuation, improved governance and better financial transparency." Barron's adds:
BMO Capital Markets has an Outperform rating and a $19 price target on shares of Forest City Enterprises. The firm has received compensation from the company for products or services other than investment banking in the last 12 months.

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