BUY, SELL, HOLD, RATINGS FROM THE PRO’S
One of the things you have access to with any online discount broker are analyst reports. If you have an E*Trade account, you will see a tab that says “Analyst Research” towards the top of the screen when looking at a stock. If you don’t have a stock account anywhere, you will not have access to this area because it is one of the perks you get for signing up.
The analyst research will usually include reports from institutions like Standard & Poor’s, MarketEdge, Thomson Reuters, Morningstar, and others. These will be detailed reports that open up in PDF files and some of them can be quite long and involved. They will have lots of charts, graphs, and numbers which make them hard to read unless you like that sort of thing.
The first thing you should always look for is the date the report was prepared. These reports usually come out quarterly so the most current one still could be 3 months old. In today’s fast moving market, a lot can happen in 3 months and so you need to pay attention to how long ago the report was written.
It has seemed to me over the years that analyst’s ratings of stocks have in general, been too positive. Inevitably, whenever I look at research like this, more analysts will give a positive or buy rating as opposed to a negative or sell rating. Most will fall under a hold rating but overall, I am amazed at how many stocks are rated as a buy. Can this possibly be because buy ratings will drum up more interest than sell ratings?
While I am not accusing anyone of putting out false information, I am merely suggesting that you read these reports with an open mind and know that they are just the opinion of one person or organization. Often you may realize that for any given stock, one report may rate it a buy and another one may rate it a hold or a sell. So, if you buy stocks based solely on one of these analyst’s reports, know that they could be wrong.
Everyone has an opinion, whether it be the experts on television, on radio, in magazines, or in newspapers. Every full service brokerage and discount online brokerage also have their in house analysts who’s full time job is to research and write reports on what they find. Stock recommendations and opinions are a dime a dozen and you never know how much the person making that recommendation really knows.
Find Someone You Trust
There are a couple of analysts I have followed over the years and have gotten to trust. I like the way they present their information and their investment strategy is relatively conservative, just like mine. In other words, if they recommend a stock, I know they have put a lot of thought into it. I wish I had followed more of their advice over the years and bought a greater number of the stocks they liked because I would have made more money.
If you are going to buy stocks that you hear the pro’s recommend, it makes sense to find an analyst or institution that you can trust. This cannot be done over night as you have to spend months and years tracking the stocks they rate positively. They have to prove to you that their stock picks are solid and that they are worth listening to. Their picks won’t always be right but they need to show you that more often that not, they know what they are doing. By the way, the two stock analysts I like are Jim Jubak and Pat Dorsey.
