Underperform

Finance allah shmoop what is a stock rating Buy sell

hold that's about it Those are the ratings only three

of them stock brokers usually employ what is called a

self side analyst who writes investment reports on the favorability

or lack thereof of buying a given stock or bond

at a given price They're framed generally as within this

price range This stock is raided bye meaning they liked

the stock here for a given period forward maybe a

quarter or two maybe the next five years but the

rating doesn't specifically say by a twenty seven dollars and

twelve cents it just says by why Well it starts

with the fact that anyone who's good it actually picking

stocks would pick stocks and do that for a living

or for their own account There's almost no other legal

career on the planet where an individual can work fewer

hours and make more money than if they can read

a crystal ball of stock picking futures and invest their

own money Well remember that you could have bought twenty

five grand worth of amazon two weeks after its aipo

in the late nineteen nineties and today that would be

worth tens of millions of dollars with you doing nothing

all along the way how's that feel so it's a

fair question to ask Why would someone publish a stock

rating at all when statistically their ratings are no better

than a monkey throwing bananas at a dartboard Well the

reality is that brokerage is used to make decent money

on commission's before computers took so much of a profit

margin spread from the business for decades the role of

the analyst was to keep the attention of company management

so that when the company did a financial offering or

sold themselves to an acquire or will the company then

would hire the investment bank for their lucrative to the

bank investment banking services And when that management sold their

shares in the company that they were managing they put

those cash proceeds as investments in the lucrative to the

bank Proprietary hedge funds i e the bank's own hedge

funds ones they managed and made tons of profit from

So not surprisingly in most times in history when eighty

seven analysts were covering a given stock eighty six of

them had strong buy ratings on the stock with a

little asterisk which led to another one at the bottom

of the page That said when you do lucrative banking

deals please pick me me mean well this fact was

shouted out loudly in the mid nineteen nineties and banks

quickly adjusted as they were kind of shame for being

willing to publish anything tto win banking business and like

did we expect anything different from them really well those

new regulations required analyst to segment top middle and bottom

third enthusiasm levels that they held in their ratings of

stocks at given price points like they couldn't be strong

by on everything their success or failure in actually picking

Could stocks however did not change but the asterisks with

the mimi me things basically went away and yeah they're

still bad stock pickers go with the monkeys and their 00:03:04.07 --> [endTime] bananas Why Well because the banana has appeal