Tuesday November 24, 2009 11:17 PM ET
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Screens by Jack Hough (Author Archive)
Analyst 'Hold' Ratings Are a Wimpy Middle Ground
LIKE MOST AMERICANS I'm inexplicably drawn to a good British scolding. I get my fix from television talent contests, the best of which feature a cranky Briton calling some hopeful singer or chef a train wreck or a donkey. The fascination, I'm pretty sure, has something to do with how predictably nice our reviews have become in these United States of Awesome.
Take analyst stock recommendations. In theory they should tell us whether or not to buy a particular stock. Two ratings would suffice: buy and sell, or buy and don't buy, or brilliant and donkey. Whatever. Instead, analysts soften the criticism with a hold recommendation. Last year 48 percent of recommendations were holds, but just 7 percent were sells, according to Bloomberg. That raises the question of whether a hold is a de facto sell, an endorsement (you can't hold a stock you don't buy) or just analyst indecision.
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