What are the definitions of the analyst ratings? It is very difficult to understand the difference between Strong Buy, Buy, and Accumulate. They all mean that you should add to your portfolio. Yet when a rating is changed from Strong Buy to Accumulate, the stock will usually decline. Recently a firm put out a Sell rating on a stock. Then a couple of weeks later raised it to hold. Now how can you hold something that you do not own? If you had sold the stock on the initial recommendation, would not the proper new rating be accumulate? These recommendations are very confusing, but cause havoc on a stock's price. (August 25, 2001)
Each brokerage has a different rating system, and even when the words match, the action to be taken can differ. Moreover, you also see 'focus stocks' and other 'stock of the week' labels. Very confusing. When a stock's rating is cut by a brokerage, even if it is from say 'strong buy' to 'buy,' the price is often adversely impacted. The reason is because the brokerage appears to view the stock less favorably for whatever reason. The specific instance you describe does appear to make no sense-if you sold it, there is nothing to hold. Maybe they realize that not many follow their advice, so they are telling the stragglers that held they still don't think much of it. In any event, why would you want to accumulate a so-so stock? Would not you want to strongly buy a stock that is worth your money? Why go after second rate or worse companies (at least in the brokerage's mind)? It is best not to follow brokerage ratings, but instead look at the sales and earnings growth, the price/volume action, the sector, the pattern, and how the market is doing overall. Those are much more reliable.
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