Extracting the Most of the Analyst Reports

There are many respected stock analysts, many of them are experienced, forward-thinking stock evaluators, but are not always correct. It is often considered that the investors should know how far they can rely on the analyst reports. Some of the studies reflect that analysts' forecasts and investment recommendations are at times too optimistic in nature.

It is not necessary that all the analysts specialize in all the industries. There may be some analysts specializing in steel industry, another analysts specializing in glass industry and another in machinery. Analysts are hired by brokerage houses to research the business practices, industry trends and annual reports of some business firms. When the analysts' advice is good, investors buy stocks in advance of increasing values. But in case of a bad advice investors may be compelled to sell incurring losses.

Following is a list of some of the points which may help the investors in extracting the most of the analyst reports-

You should check at the end of the analyst reports, whether the analyst is a representative of the company or not. If the author is a representative of the company he is writing about, the report may lose its objectivity. In case the company is paying the analyst for the research report then you may ignore that investment.

You should check the analysts' credentials. If any analysts are having a designation of Chartered Financial Analyst (CFA), it ensures that he has undertaken some years of testing, adding to his expertise.

You should avoid those analysts who wear rose-coloured glasses. This is because that it may be personally beneficial for the analysts to be too optimistic about a particular company's report. We do take into account that many analysts are not willing to forego their objectivity for short-term gains.

You should refer to an analysts' long term record, over a period of several years. You may rely on an analyst who has earned experience over a considerable period of time.