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When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important? Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about CVS Health CVS . CVS Health currently has an average brokerage recommendation of 1.
98, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 25 brokerage firms. An ABR of 1.
98 approximates between Strong Buy and Buy. Of the 25 recommendations that derive the current ABR, 11 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 44% and 12% of all recommendations.
Brokerage Recommendation Trends for CVS Do you wonder why? As a result of the vested interest of brokerage firms in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms assign five "Strong Buy" recommendations for every "Strong Sell" recommendation. This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement.
It would therefore be best to use this information to validate your own analysis or a tool t.
