Fire Your Stock Analyst!: Analyzing Stocks on Your Own

Analysts’ Ratings

The point of an analyst’s report is to advise clients whether to buy or sell the company’s stock. However, it’s not that simple. For instance, an investor planning on holding for five years might be buying a stock that an investor with a shorter horizon is selling. So analysts developed a variety of rating variations, and, to further confuse the issue, each brokerage has its own terminology.

For instance, Goldman Sachs will put a stock on its Recommended List if it thinks it’s going up in short order, while Merrill Lynch might label it a short-term buy, and Prudential Securities would say strong buy. The only way you can be sure of a specific ratings definition is to consult the brokerage’s rating explanation, sometimes included ...