Every morning I log into my online account to see how things are going for the day. Most of the time I am not logging in to buy stocks or sell stocks but just to see how everything is doing.
When you have a portfolio of stocks, lets say 10 different stocks, you will sometimes notice that one of the stocks goes up or down more than normal at the market’s open. The stock in question may move 3%, 5%, or even 10% but I am talking about some percent that is not normal.
Whenever that happens I know one of two things has happened: 1) there is some news story that is moving the stock or 2) there was an upgrade or downgrade to the stock by an influential brokerage house or analyst.
A news story is self explanatory: unexpected company news will often move a stock one way or another because investors are reacting to that information for the first time.
But the stock can also be moving because of an overnight upgrade or downgrade as well. There are hundreds of brokerage firms but most of them you will have never heard of. Employed by most of those firms are analysts that are there to analyze stocks and to give clients their recommendations. That is one of the ways brokerage firms make money: they charge for their expertise and recommend stocks based on the objectives of each client.
Every big brokerage firm does it’s own analysis of the market and has its own rating of many stocks. After all, they are in the business of being able to offer top of the line financial advice that includes telling clients what they recommend they do with their money.
Out of all the thousands of stock analysts working for the hundreds of brokerage firms across the country some of the analysts will, one way or another, become more trusted and famous than the rest. Maybe it is because they are a regular on a television TV show or because their track record of stock predictions is exceptional. Somewhere along the line though, they made a name for themselves and usually the analysts that work for the bigger name brokers have an easier time becoming influential just because they work for the more prestigious company.
Analysts and brokerage firms make stock upgrades and downgrades every single day. But it is when one of the “influential” analysts (usually at a big name company) makes a call that a stock can react. This is just the way things are in the world and in the stock market as well: some people’s opinions carry more weight and are more influential than others.
When a prestigious brokerage firm or analyst goes public with a stock upgrade or downgrade, that is sometimes something that may move a stock. They will often give a new target price based on what they say is current information and in response to that, people will decide to buy the stock or sell it, depending on what the analyst said. This obviously makes both upgrades and downgrades important in the stock market and it is why your stock may be going up or down significantly on any particular day.