Brokers Suggest Investing in Microsoft (MSFT): Read This Before Placing a Bet
The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?
Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Microsoft (MSFT).
Microsoft currently has an average brokerage recommendation (ABR) of 1.38, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 32 brokerage firms. An ABR of 1.38 approximates between Strong Buy and Buy.
Of the 32 recommendations that derive the current ABR, 26 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 81.3% and 6.3% of all recommendations.
Brokerage Recommendation Trends for MSFT
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While the ABR calls for buying Microsoft, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.