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Types of ratings used to rate stocks

Ratings are most commonly used Call to action tool used for stock trading. Analysts use many ratings to rate the stocks.  This post covers different types of ratings used and what they mean.

Buy, Sell, Hold

Ratings analyst rate the shares of company as buy, sell or hold based on their research and analysis. Analyst will rate the stock Buy if price is expected to rise more than market or index depending on current valuation and future outlook. Rating will be Sell, if price is expected to go down. Rating will be hold if price is expected to rise at a rate similar to other stocks or market.

Outperform, Underperform

Outperform is another form of Buy rating. Analyst usually use outperform when the rating is better than hold but less than Buy. Similarly, Underperform is used when rating is expected to be better than Sell but worse than Hold.

Overweight, Underweight, Marketweight

This is another way to rate stock. Fund Managers will usually overweight a particular stock in portfolio as compared to underlying index if they feel the stock will perform better than the index. So, overweight is equivalent to Buy rating. In the same way, Underweight is equivalent to sell rating.  Marketwieight is equivalent to hold ratings.

Downgrade, Upgrade

Analyst will downgrade or upgrade a stock if conditions or future outlook changes as compared to initial recommendation. An example of downgrade will be change of rating from Buy to Hold or Sell.

Leader, Laggard

Leader is used for the stocks that have been outperforming market, whereas Laggard is used when stock has been under-performing market.

Accumulate, Neutral, Swap

Accumulate is used for stocks that are expected to outperform. Neutral is used for stocks that are expected to perform at market level. Swap is used for stocks that expcted to underperform


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