| Word On The Street Quick Links |
Passing grades.
Strong Buy.
Buy.
Accumulate, Attractive, Market Perform, Long Term Attractive, And Outperform.
Hold, Neutral.
Under-perform.
Sell.
Strong Sell.
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| Passing Grades |
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Every company trading on a stock exchange is rated as to it's investment quality by the various investment houses on Wall Street.
Given the number of variables that make a stock a wise or poor choice for investment, the brokerage community has developed a system designed whereby a single number is used to show a stocks strength. This allows the public to quickly rate a stock as to it's investment potential.
Generally each stock is rated on a 7 point scale. In all cases the top two ratings are buy and strong buy and the two lowest being sell and strong sell. The middle three ratings are known by a variety of names that vary from brokerage to brokerage.
Note: Any reduction or upgrade is likely to affect the stock price. A Strong Buy reduced to a Buy will almost always mean a drop in price even though the equity is still considered worthy of purchase.
In other words stocks often react to changes in ratings, rather than reacting to the ratings themselves.
In addition, analysts often blanket industries with their ratings, giving an entire sector a sell or buy for example. In these cases it is usually as a reaction to an industry condition, such as a government cut in military spending inducing a decrease in ratings for all military technology companies in general, rather than one specific company.
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| Strong Buy |
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This is the highest rating any stock can be given. An equity with this rating is considered to be an excellent investment opportunity, with significant upside. However, it should be noted that analysts often change their ratings after a stock has been performing a certain way. For example, once a stock has made a significant move to the upside many analysts will begin to jump on the bandwagon and raise their ratings. In fact, by the time a stock receives a Strong Buy it has often already made the majority of the move that made it an attractive investment.
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| Buy |
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Obviously not as good as a Strong Buy, this rating indicates that the equity is worthy of investment.
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| Accumulate, Attractive, Market Perform, Long Term Attractive, And Outperform |
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All five of these terms generally fit between Hold and Buy. A stock with this rating is expected to do slightly better or equivalent to the market return.
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| Hold, Neutral |
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This rating means that an investor currently owning shares should keep their position but not increase or decrease it, while an investor not owning shares should regard this equity as one that does not contain enough strength or upside to merit interest.
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| Under-perform |
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This stock is expected to do slightly worse than the market return.
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| Sell |
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In the opinion of the brokerage house issuing the rating, this equity should be sold if in your portfolio. Usually there needs to be some inherent difficulty with either the company itself or the industry that the company operates in. For example, an economic slowdown often hurts steel production stocks, which could cause an analyst to lower their rating on one particular issue that they follow, of the entire sector in general.
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| Strong Sell |
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The lowest rating, this stock is considered especially weak and may have serious financial difficulties. Usually by the time a brokerage house has applied a Strong Sell rating to an issue it is following, it is too late for investors and the share price has already plummeted.
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Stock Quotes |
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Quotes, charts, and research (15m delay) are available for most NASDAQ, OTC-BB, and North American stocks through Bigcharts.com.
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