The stock market runs on disagreement. After all, every purchase of shares is also a sale. However, when disagreement on a stock takes the form of widespread confusion among professional forecasters, it’s often a negative sign.

Consensus earnings estimates mentioned by the press are tabulated, of course, by blending together the estimates of individual analysts. Sometimes those individual estimates are tightly clustered around the consensus number and sometimes they’re scattered far from it in either direction. In a study published in 2002 in the Journal of Finance, researchers showed that stocks with widely scattered estimates tend to produce poor future returns, a phenomenon now called the dispersion effect.

In the study, a mock portfolio bought the fifth of stocks with the lowest dispersion and sold short (bet against) the fifth with the highest dispersion. That sort of long-short test is used to cancel out broad market movements and isolate the predictive power of a single variable, in this case forecast dispersion. When the variable has no predictive power, returns for the strategy are close to zero. In this case, the long/short portfolio returned 9% a year. A separate portfolio that focused on small-company stocks returned 18% a year.

Intuitively, the results make sense. If companies are anything like friends and coworkers, they’re quick to trumpet their successes, but they’re not as forthcoming about their failures. That means the companies that provide detailed financial guidance to analysts, resulting in those tightly clustered consensuses, might also be the ones that are prospering.

Forecast dispersion is merely one sign among many for investors to consider when evaluating a stock, so high dispersion for the three stocks listed below doesn’t necessarily foretell poor performance. Investors should decide for themselves whether the high degree of earnings uncertainty surrounding these companies is sufficiently reflected in their share prices.

AOL

After an awkward, decade-long marriage to Time Warner (TWX), AOL (AOL) is once again an independent company. Before the merger, AOL was a fast-growing provider of dial-up Internet service whose astonishingly pricey shares often gained or lost $10 in a day. Today, the stock sells for just 10 times this year’s earnings consensus, having climbed from $23 and change to about $26 since the December break-up. The company’s subscriber base, once 35 million strong, has shrunk to about five million, and its yearly sales, which peaked at $9 billion, are now less than one-third of that. Management has a plan to transform the business into a premium content hub, and has spent generously of late to lure veteran columnists and other talent. AOL remains well-funded and highly profitable, but current forecasts call for sales and earnings to decline by double-digit percentages next year.

Goldman Sachs

For an account of how Goldman Sachs (GS) and other banks turned bailout cash into giant bonuses and profits, read Matt Taibbi in Rolling Stone. Suffice it to note that Goldman shares sell today for about the same price they fetched two years ago, before the financial crisis began in earnest, and that the company’s balance sheet has never been stronger. Analysts who cover the stock overwhelmingly recommend a purchase of it. Goldman’s future earnings, however, are highly dependent not only on a global economic recovery but also on continued government support or, at least, on a lack of profit-sapping regulatory reform. Hence, the wide forecast dispersion. Profits are so robust at the moment that shares trade at little more than nine times this year’s consensus forecast — and just 11 times the lowest estimate in the consensus.

SanDisk

Apple (AAPL) is scheduled to launch its new iPad, a sleek tablet computer, on April 3. With unemployment high and consumers strapped, initial sales could underwhelm, but then again, with Apple there’s always the possibility that the device will redefine portable computing, just as the iPhone and iPod did for phones and music players. That makes this a difficult time to forecast profits for companies like SanDisk (SNDK), which makes high-speed, low-energy flash memory for electronic devices. Analysts say inventory levels for such memory are low, and Wall Street’s consensus estimates have SanDisk’s sales and profits rising 27% and 47% this year, respectively.

Jack Hough is an associate editor at SmartMoney.com and author of “Your Next Great Stock.”

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