The new recommendation structure is aimed at improving Goodbody’s research offering and has four levels. According to Joe Gill, the newly appointed head of institutional research at Goodbody, the new structure will result in clear action based signals from analysts to investors as to what decisions they should make.
Up until now, the option of issuing either a ‘buy’, ‘sell’, or ‘hold’ recommendation has been inclined to make analysts defer to a hold recommendation, says Gill, as buy or sell is often too strong, and is either excessively positive or excessively negative.
The new structure at Goodbody means that analysts will now issue one of the following ratings depending on what the analyst perceives the growth prospects of the stock to be:
• Buy - if growth is expected to be in excess of 15 per cent
• Add - if growth is expected to be between 0-15 per cent
• Reduce - if the stock is expected to fall by between 0-15 per cent
• Sell - if the stock is expected to fall by more than 15 per cent
In implementing this new recommendation structure, Gill was particularly conscious of international institutional investors who may only look at Irish stocks every so often. ‘When these investors do look at Irish stocks, a ‘hold’ recommendation does not give them enough information as to whether they should buy or sell the stock,’ says Gill, ‘so there is no great appetite amongst institutional investors for a ‘hold’ recommendation’.
While NCB Stockbrokers’ ratings structure is similar, it does issue ‘hold’ recommendations. Its ratings are as follows - ‘buy’, ‘add’, ‘hold’, ‘reduce’ and ‘sell’. Davy Stockbrokers no longer issues recommendations.
Having performed disappointingly in this year’s annual Finance Stockbroking Survey, winning only one category - Colin Hunt, Goodbody’s director of research took the ‘Best Research Economist’ award Goodbody are keen to improve their research offering and there has also been a realignment of responsibilities within the research department at Goodbody so that analysts will now be responsible for just one sector. |
