Stock Analyst Coverage - What It Is And Why It Matters

From Strong Buy to Sell Recommendations, Here's What Stock Analysts Do.

Investment banks and other companies that provide research coverage for stocks typically assign stock analysts to various companies under their coverage umbrella. Analysts then begin following that company's progress, looking at the public records it files as well as news reports and financial information about its competitors, customers and suppliers. They watch the company's quarterly conference calls, listen to interviews of its leadership and seek out any material information that might help them better understand the company's strengths and weaknesses.

Once an analyst is able to form a clear picture of how successful or not-so-successful a company has been, they then share that view with their clients by way of research reports. These reports typically cover a single company, a group of companies within a similar industry or multiple industries. Research reports may include some background information about the analyst, their past experience and qualifications as well as any stock purchases or sales they have made recently. Each report also includes an executive summary of the key items covered in the document, so that even if you don't have time to read the entire report, you can get the gist of things from this summary.

Analysts typically include a list of risks that could impact a company's performance and they may even assign ratings such as "strong buy", "buy", "hold" or "sell". These designations help investors to quickly determine whether or not they should investigate further.

The performance of a stock analyst can have a big impact on their company or employer, as well as the companies they cover. If an analyst shares positive research about a company's prospects but that information turns out to be wrong, then it will probably hurt the analyst's reputation, potentially resulting in job loss. That said, if an analyst shares negative research about a company but the stock does well, then they may be blamed for being wrong. Either way, analysts are typically required to publish reports on a regular basis so that they stay active in the minds of their clients and potential future clients.

Stock analysis is not just done by investment banks or large financial services providers. Even individuals can track the progress of specific companies they are interested in by monitoring analyst reports. If you don't have time to read full research documents, then following trends in your news feed or checking out professionals' LinkedIn profiles could help you determine when major changes may be coming so that you can jump on them ahead of the crowd.

We all know that some stock analysts make great calls and others swing for the fences but miss. If you want to be a more successful investor, then try following some of the best analysts in your industry or any industries that interest you. With some patience and good timing, their research could help you beat the market averages on a regular basis.

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