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A broker recommendation is an opinion offered by a securities broker to clients who would like assistance with making decisions about which securities to buy, sell, and hold. Some brokers may base such recommendations on their own analysis of companies and market conditions, while others rely on the opinions of analysts who work for their brokerages. The recommendation may reflect the unanimous opinion of the brokerage, or it may come from a specific broker or analyst.
Also known as opinions or ratings, broker recommendations are among the services brokerages offer to their clients. It is usually necessary to be a paying customer to access recommendations. Clients can receive recommendations customized to their accounts, and brokerages also usually release recommendations in newsletters and other publications targeted at their clients.
Different brokerages use varying terminology when they make broker recommendations. The most basic terminology used is buy, hold, and sell. These terms are fairly self explanatory; they mean that the customer should consider buying a security, holding existing shares, or selling existing shares. Brokerages may have additional terms such as a "strong sell" or they may refer to whether or not a security is expected to outperform the market.
To formulate a broker recommendation, an analyst must be familiar with the market in general and the conditions which may impact a specific security. This includes reviewing information about companies to learn more about their projected future, developing financial models, and keeping track of rumors which might be indicators about the future movement of a security. All of this data is pulled together in a report which is designed to accurately assess a security's current and projected value.
Clients are not required to follow a broker recommendation. They may prefer to make their own decisions or may disagree on a given recommendation. People who are not as interested in being involved in investment decisions can consider using a money manger who will make financial decisions on their behalf, using broker recommendations as a guideline for sound investment.
People who do not have access to a broker because they manage their trading themselves can still find broker recommendations. Financial publications sometimes provide recommendation lists which are drawn from the opinions of experienced brokers. Online, people may exchange tips and information with each other and include broker recommendations in these tips when they receive them. Care should be taken when reviewing advice from strangers, however, as people may be attempting to engage in manipulation.