Investors often turn to recommendations made by Wall Street analysts before making a Buy, Sell, or Hold decision about a stock. While media reports about rating changes by these brokerage-firm employed (or sell-side) analysts often affect a stock's price, do they really matter?
Let's take a look at what these Wall Street heavyweights have to say about Modine (NYSE: MOD) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
Modine currently has an average brokerage recommendation of 1.17, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by six brokerage firms. An ABR of 1.17 approximates between Strong Buy and Buy.
Of the six recommendations that derive the current ABR, five are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 83.3% and 16.7% of all recommendations.
Brokerage Recommendation Trends for MOD
The ABR suggests buying Modine, but making an investment decision solely on the basis of this information might not be a good idea. According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.
Do you wonder why? As a result ...
