Watch TipRanks CEO Uri Gruenbaum explain how investors can benefit from tools that help them evaluate how good an analyst is, why Sell ratings, although less likely to be correct in recent years should interest you, and which stocks leading analysts in 2020 are rating for 2021, in this interview with Nasdaq Trade Talks Global Markets Reporter, Jill Malandrino.
Below the interview, you can see Jill’s questions and Uri’s answers, as well as the graphics.
Questions & Answers
Q. TipRanks provides a service that among other things, tracks analyst ratings. What do these ratings teach us?
A. Generally analysts know how to move the markets. If an analyst from a big firm says buy or sell, you’re going to see an impact. However, for the average investor, analyst ratings don’t say much. The average analyst rating in 2020 made around 10%, meanwhile, the markets did 20%. If you have a tool like TipRanks that helps you evaluate how good an analyst is, then you have an edge. You can see if you are getting advice from someone that has proven themselves, that is outperforming the S&P or other indexes, or someone who doesn’t know what they are talking about, which is often the case.
Q. Should investors distinguish between Buy and Sell analyst ratings?
A. Most ratings are Buy ratings, around 62%. An analyst giving a Sell rating is pretty brave. They must really believe you should be selling because this is pretty unusual. For companies like Goldman Sachs 15-20% of ratings may be Sell, but from tier 2 companies, you are almost always going to see a Buy rating. Sell ratings haven’t been performing as well as Buy ratings as the markets have been Bullish for the past 12 or 13 years. When you see a Sell rating, it should alarm you, it’s worth reading why an analyst now says the stock is a Sell.
Q. TipRanks tracks analyst performance, how do you do this and how can investors use this information?
A. We look at every resource to see what every analyst in the world is saying. We get a lot of reports directly from banks, we analyze any idea that is being published on financial news websites, like Nasdaq.com and other websites. We look at 3 main factors to assess an analyst, financial blogger, or other financial experts:
The average return of their recommendations
Their success rate – how often are they right
The significance of the data – those with more recommendations are likely to perform better, it is easy to get something right 3 times, a lot more difficult 70 times
Q. Who were the best performers in 2020?
A. These 3 analysts led the year – Jason Helfstein from Oppenheimer, Mark Mahaney from RBC Capital who we see on the list every year, and David Hynes from Canaccord Genuity.
They all cover the technology sector, which makes sense as it really blew up this year.
Q. Can you tell us which stocks these analysts are recommending for 2021?
Jason Helfstein is recommending Twitter, with a $58 price target. Mark Mahaney has been Bullish on Netflix for many years and has given it a high price target of $630 and David Hynes recommended Dropbox with a price target of $30.
Q. TipRanks analyzes big financial data and powers Nasdaq.com’s Smart Portfolio with data-driven insights. Tell us more about the partnership.
A. We have a wonderful relationship with Nasdaq, which started a few years ago. Together we built a tool that enables investors to see all the big data that we analyze in one place, streamed directly to their portfolio. They can sync their portfolio to their bank, but more importantly, they can see what any expert in the world thinks about their stocks and filter out all the underperforming experts.
You can have an average watchlist or have a watchlist that shows you what real experts think about your portfolio, and give you data-driven insights such as news sentiment, analyst research, and corporate events. This has been doing phenomenally well, with very high engagement numbers on Nasdaq with users checking their portfolios throughout the day.
