Australian analysts cover approximately 450 ASX listed companies.
Unfortunately, when reviewed individually many analysts and stockbrokers have difficulty beating the market average .
Several firms in Australia collate ASX research reports published by stockbrokers and generate a "Consensus Recommendation" for each company. These data feeds are then on-sold to institutional clients for distribution.
There's a couple of disadvantages to these databases:
1. Lack of depth:
Smaller-cap companies are often covered by only one analyst.
2. Unknown update times: Analysts often stop coverage on a company without notifying the market. This leads to outdated consensus data.
Market Index tries to counter these pitfalls by:
• Publishing broker number:
The number of brokers involved in a recommendation is displayed.
• Size Filter: Only the largest 125 companies in our consensus database are listed below. Analysts usually review their recommendation on large companies more often than small-caps.
• Freshness cut-off: Ratings older than 60 days are ignored.
Market Index sources data from institutional distributors.
As brokers use several different rating systems, Market Index groups ratings according to a basic 3-tier scale: Buy, Hold and Sell.
|Market Index||Broker Rating|
|"Buy"||Strong Buy, Buy, Accumulate and Outperform.|
|"Hold"||Hold and Neutral.|
|"Sell"||Strong Sell, Sell, Reduce and Underperform.|
|Buy||2.69 - 2.31|
|Hold||2.30 - 1.81|
|Sell||1.80 - 1.50|
|Strong Sell||1.49 or less|
Market Index gives each recommendation a score:
Buy = 3, Hold = 2, Sell = 1
The total is divided by the number of brokers.
Analysts have a bullish bias so cut-off scores aren't evenly spread. The levels are arbitrary and were selected to make skimming the list easier. You can make your own levels using Excel.
Consensus data should only be used to uncover companies that might warrant further investigation. Analysts often look solely at a company's fundamentals while ignoring market sentiment and momentum. Don't base any investment decision on the data.
NOTE: Share prices as at previous close.
Analysts tend to produce more reports with a “Buy” than a “Sell” so the number of recommendations generally favour the buy side.