Strong Buy
A strong buy is a recommendation given by analysts for a stock that is expected to dramatically outperform the average market return and/or the return of comparable stocks in the same sector or industry. A strong buy rating is usually accompanied by an extremely optimistic price target on the stock, such as a 30% to 50% gain over the coming 12 months. The strong buy rating isn't nearly as highly regarded as it was only a few years ago. **A history of positive earnings surprises:** If a company has a strong track record of outperforming its own performance forecasts, analysts may regard a stock as a superior option compared to competitors, which would make a strong buy rating appropriate. If a company does business in a strong industry and they're predicting strong growth, that can be a reason for a strong buy recommendation. What exactly those reasons are can vary considerably, but in general, the analyst usually predicts the potential gain in anticipation of some sort of positive event, such as a return to profitability or the launch of a new product. A strong buy writing is usually accompanied by an extremely optimistic price target on the stock, such as a 30% to 50% gain over the coming 12 months.
What Is a Strong Buy?
A strong buy is a recommendation given by analysts for a stock that is expected to dramatically outperform the average market return and/or the return of comparable stocks in the same sector or industry. It represents an analyst's emphatic endorsement of a stock.
A strong buy can be contrasted with a strong sell.
Understanding a Strong Buy
A stock with a "strong buy" rating is expected to significantly outperform the markets over the near term. A strong buy is the strongest recommendation that an analyst can give to purchase a stock. As with any type of analyst rating, the rating is only relevant until a material event occurs that results in the analyst changing his or her outlook regarding the company. A 'strong buy' means the analyst believes the stock's underlying company is or will soon be experiencing positive financial performance and/or favorable market conditions.
A strong buy rating indicates an analyst has reason to believe the stock will trade drastically higher over the coming months. What exactly those reasons are can vary considerably, but in general, the analyst usually predicts the potential gain in anticipation of some sort of positive event, such as a return to profitability or the launch of a new product. A strong buy writing is usually accompanied by an extremely optimistic price target on the stock, such as a 30% to 50% gain over the coming 12 months.
The strong buy rating isn't nearly as highly regarded as it was only a few years ago. As such, many investment banks currently prefer to stick with the less emotive buy rating.
There is no universal ranking system, so it's important to understand a firm's rating scale in order to know what it means by the terms it uses.
Possible Reasons for Strong Buy Recommendations
Related terms:
Investment Analyst
An investment analyst is an expert at evaluating financial information, typically for the purpose of making buy, sell, and hold recommendations for securities. read more
Buy
Buy is a term used to describe the purchase of an item or service that's typically paid for via an exchange of money or another asset. read more
Endorsement
An endorsement is an amendment to a document or contract, an authorizing signature, or a public declaration of support. read more
Financial Performance
Financial performance measures how well a firm uses assets from operations and generates revenues. Read how to analyze financial performance before investing. read more
Focus List and Uses
A focus list is a list of recommended stocks published by an investment firm's research department. It's typically a short list of their best trade ideas. read more
Fundamental Analysis
Fundamental analysis is a method of measuring a stock's intrinsic value. Analysts who follow this method seek out companies priced below their real worth. read more
Hold
Hold is an analyst's recommendation to neither buy nor sell a security, on the belief that it will perform at the same level as comparable companies. read more
Outperform
Outperform is an analyst's recommendation that a stock is expected to do better than the market return. Also known as "market outperform," "moderate buy" or "accumulate." read more
Strong Sell
If a company is expected to dramatically underperform, it may earn a "strong sell" recommendation from analysts. read more
Value Investing
Value investors like Warren Buffett select undervalued stocks trading at less than their intrinsic book value that have long-term potential. read more