The ratings game
The ratings game
Analyst ratings are a good starting point for retail investors to invest in stocks. There are two problems with this, though: some of the analysts may be part of investment banks that have relationships with the companies being rated, and, although there are so-called Chinese walls between the research and banking divisions of these firms, they aren’t always non-porous. Two, analyst ratings aren’t always accessible to retail investors. ‘Bloomberg’ compiles analyst ratings and assigns a number to each between 1 and 5, where 5 is the highest recommendation (typically, “Buy") and 1 the lowest (often, “Sell"). The average is arrived at by adding these numbers and dividing by the number of recommendations made in the last 12 months. The target price is the average of the analysts’ predicted price in the next 6-18 months. Mint presents Bloomberg’s rating of the BSE 500 stocks with the highest analyst rating and those with the lowest, as of 4 April. BSE 500 is a list of the Bombay Stock Exchange’s most valuable stocks by market capitalization.
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