Management teams and IR professionals tend to take stock rating downgrades personally. While a downgrade may sting on the day of, in the long run all stocks’ ratings are subject to fluctuations – both up and down. To get a better feel for how the buy-side reacts to ratings downgrades, we reached out to both buy-side analysts and portfolio managers to get some real-time feedback. The conclusion? In general, the buy-side really doesn’t care about the rating on a particular stock. The representatives we spoke to clearly are more interested in learning as much as possible about a company and are less interested in a stock’s label.
Following are ten direct quotes about this topic that speak to why analyst ratings really don’t matter:
- “I don’t care about analyst ratings. I do my own research and try not to let the sell-side influence me.”
- “I love analyst downgrades because it gives me an opportunity to buy the stock.”
- “Most of the time I don’t even know what their ratings are, I just talk to the analysts that know the company the best.”
- “I’ve done this for long enough to know that more than half of them are wrong on their ratings.”
- “Sometimes ratings are based on momentum and not fundamentals. I invest in fundamentals.” Continue Reading