Equity research firms may use different stock recommendation systems, which can be confusing for investors. To help clarify these ratings, the following reference table explains the different stock ratings used by equity research analysts:
|Positive||Strong Buy / Top Pick||These companies are believed to have the highest potential to outperform the market.|
|Buy||These companies are expected to outperform the market.|
|Speculative Buy||These companies are expected to outperform the market if anticipated events happen.|
|Outperform / Overweight / Accumulate||These companies are expected to modestly outperform the market, and investors are advised to add the company’s stock on price weakness or improved fundamentals.|
|Neutral||Hold / Neutral / Market Perform / Sector Perform / Peer Perform / Equal-Weight /
|These companies are expected to perform in-line with the market and are fairly valued at the current price level.|
|Negative||Underperform / Underweight / Reduce||These companies are expected to underperform the market, and investors are advised to sell the company’s stock on price strength.|
|Sell||These companies are expected to significantly underperform the market, and investors are advised to sell the company’s stock at once.|
It’s important to note that these ratings are not standardized, and different research firms may use different terms to indicate similar ratings. Investors should consider the specific rating system used by each research firm when interpreting their stock recommendations.
While equity research analyst’s stock ratings do not directly influence my own stock investment analysis, I do pay attention to them as they can impact short-term price movements. To stay informed about news related to the stocks I follow closely, I use the free tool described on the Monitor Your Portfolio page. This tool also alerts me when a research analyst updates its stock recommendation, allowing me to quickly evaluate any potential impact on my portfolio.
If you’re interested in learning more about the meanings behind each rating, MarketWatch provides a guide to analyst recommendations on their website.