Stock Sell Ratings Are Few and Far Between

Stock sell ratings seem as if they are nonexistent at times. In most cases, the ratings that investors see are all some variation of "buy." Here are a few reasons that stock sell ratings are few and far between and how that can affect the investor.

Stock Ratings

Stock ratings are commonly issued by financial analysts from a number of different financial companies. These financial analysts work for investment banks, brokerages and other financial businesses. Financial analysts will choose a company and come up with a detailed report on the prospects of its stock. They will use financial analysis to determine how successful a stock could potentially be in the future. The analyst will usually use financial reports from the company in order to back up these assertions. In most cases, you will see the analyst recommend that investors buy the stock. Each analyst will have a different system. For example, you might see an analyst that has recommendations of "buy" and "strong buy," while another might just say "buy." Many investors utilize these ratings in order to make important decisions about their portfolios.

Stock Sell Ratings

Even though you can commonly find recommendations to buy stock, many analysts do not commonly make recommendations to sell. In fact, you might go a long time without ever seeing a sell rating by any financial analyst. In general, stock analysts do not like to tell people to sell stock. There are a number of reasons that analysts do not generally implement this practice. 

One of the most common reasons that stock analysts do not issue sell ratings is that they are part of an investment bank that has something to do with the company stock. For example, an investment bank might be responsible for the initial public offering of a business, and one of their analysts might be tasked with doing a financial analysis on the company. It would not make much business sense for the analyst to provide a negative rating about the stock that they are issuing to the market. 

Another reason that stock analysts rarely utilize sell ratings is that doing so can negatively affect the value of a stock. These analysts have portfolios, and they know that their friends and family members also have portfolios with certain stocks in them. If the analyst were to say that everyone should sell a particular stock, it could have a negative affect on their own portfolio or the portfolios of their acquaintances.

What to Do

With this knowledge, investors should take stock ratings with a grain of salt. You know that analysts will not actually tell you if you should sell a particular stock in most cases. This means that it is up to you to make your own investment decisions. If you rely on a financial analyst to do all of your research for you, you will most likely end up disappointed.

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