TECH - Silicon Motion Is Considered a Good Investment by Brokers: Is That True? | Benzinga
The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?
Let's take a look at what these Wall Street heavyweights have to say about Silicon Motion (NASDAQ: SIMO) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
Silicon Motion currently has an average brokerage recommendation of 1.11, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by nine brokerage firms. An ABR of 1.11 approximates between Strong Buy and Buy.
Of the nine recommendations that derive the current ABR, eight are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 88.9% and 11.1% of all recommendations.
Brokerage Recommendation Trends for SIMO
While the ABR calls for buying Silicon Motion, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.
Are you wondering why? The vested interest ...