Definitions and Ratings
Our stock ratings are based on price expectations. We provide long- term ratings for an investment time horizon of at least twelve months, based on the long-term earnings outlook. We use long-term valuation methods to back-up our recommendations – discounted free cashflows, price/earnings and price/book value multiples and Economic Value Added.
Short-term ratings are for periods less than twelve months, typically three to six months. Those ratings are based primarily on a near-term earnings outlook, technical indicators and market sentiment.
Our stock recommendations are updated on a regular basis to reflect changing economic, market, sector and company conditions.
Take the example of a Strong BUY rating, which we define as a stock that we think has a fair value of more than 40% above its current price. A SELL recommendation is attached to a stock when we expect its price to decline by more than 10%.
Note the emphasis on the use of the term expected, which is meant to convey the inherent uncertainty, and hence risk, attached to forecasts. Our forecasts and recommendations, indeed those of any broker, are based on our best judgment as to the likely future performance of the market and individual stocks. We cannot guarantee actual outcomes. The underlying risk of equity investment can be mitigated, however, through carefully researched stock selection, and portfolio diversification.
| Rating | Definition |
| Strong BUY | More than 40% price upside. |
| BUY | Between 21% and 40% price upside. |
| ACCUMULATE | Between 11% and 20% price upside. |
| HOLD | Between 0% and 10% price upside. |
| REDUCE | Up to 10% price decline. |
| SELL | More than 10% price decline. |
