Equity Research Analyst’s Stock Ratings – What Do the Analysts’s Stock Recommendations Mean

Not all stock research firms use the same stock recommendation system. Therefore I have created the following reference table in which an explanation of the equity research analyst’s stock ratings are explained.

For those readers who would like to know what I think of the equity research analyst’s stock ratings and recommendations, I refer you to the first note at the bottom of this page.

In the second note at the bottom of this page, I explain which source I use to inform myself about the analyst’s stock ratings of specific stocks I am interested in.

Indication  Stock Rating  Explanation 
Positive Strong Buy / Top Pick  This category consists of companies which have the best potential to
significantly outperform the market, according to the analyst.
Buy  This category consists of companies which are expected to
outperform the market, according to the analyst.
Speculative Buy  According to the analyst, this category consists of companies which are
expected to outperform the market, if anticipated events
happen
.
Outperform / Overweight / Accumulate  According to the analyst, this category consists of companies which are
expected to modestly outperform the market. The analyst recommends to
add the company’s stock on price weakness or improved fundamentals
.
Neutral  Hold / Neutral / Market Perform / Sector Perform / Peer Perform / Equal-Weight /
In-Line 
This category consists of companies which are expected to perform
in-line
with the market, according to the analyst. These companies are fairly valued at
current price level
.
Negative Underperform / Underweight / Reduce  This category consists of companies which are expected to
underperform the market, according to the analyst. The analyst recommends to sell the
company’s stock on price strength
.
Sell  This category consists of companies which are expected to
significantly underperform the market, according to the analyst. The analyst recommends
to sell the company’s stock at once
.

If you are interested in the exact meaning behind each rating I recommend you to visit Marketwatch’s website, who have provided their own guide to analyst recommendations, by clicking the link provided.

Note: An equity research analyst’s stock rating does not have any influence on my own stock investment analysis. Therefore it’s not included in the stock investment analysis of the stocks in my stock portfolio. However, I do inform myself about the analysts’ stock recommendations, related to the stocks in my portfolio, as I believe the change in their stock ratings can have an effect on the short term price movement. On the Monitor Your Portfolio page I explain how I inform myself about news related to the stocks I follow closely, so that I am automatically informed when a analyst updates its stock recommendation.

Note: If you are interested to inform yourself about the research analyst’s stock ratings related to a specific stock, I recommend you visit the website of the Analyst Research Network by clicking this link. This website covers stock ratings for all major U.S., U.K. and Canadian stocks. There is also limited coverage of Australian and continental European equities.


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