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On websites such as Reuters an "analyst consensus" is displayed in the form of a buy-hold-sell sliding indicator.

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What is this indication based on?

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    Chicken entrails.
    – Pete Becker
    Jun 6, 2016 at 19:15

3 Answers 3

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The indication is based on the average Buy-Hold-Sell rating of a group of fundamental analysts. The individual analysts provide a Buy, Hold or Sell recommendation based on where the current price of the stock is compared to the perceived value of the stock by the analyst.

Note that this perceived value is based on many assumptions by the analyst and their biased view of the stock. That is why different fundamental analysts provide different values and different recommendations on the same stock.

So basically if the stock's price is below the analyst's perceived value it will be given a Buy recommendation, if the price is equal with the perceived value it will be given a Hold recommendation and if the price is more than the perceived value it will be given a Sell recommendation.

As the others have said this information IMHO is useless.

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To dig a little deeper, a number of analysts within (and without) Reuters are polled for their views on individual stocks and markets on buy-hold-sell. The individual analysts will be a varied bunch of fundamentalists, technical, quant and a mixture of the three plus more arcane methodologies. There may be various levels of rumors that aren't strong enough to be considered insider trading, but all of these will give an analyst an impression of the stock/market.

Generally I think there isn't much value there, except from the point of view if you are a contrarian trader, then this will form a part of the input to your trading methodology.

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    I think all the analysts would be fundamental, technical analysts don't rate stock in this way.
    – Victor
    Jun 6, 2016 at 22:01
  • This is a bit of a narrow view. imho. The analysts at fatprophets.com are a very mixed bag and when you read their detail, they use a large number of techniques for their recommendations. I am a subscriber at fatprophets. This is but one example. I shall search for others and edit up my answer.
    – Marcus D
    Jun 7, 2016 at 7:07
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    Technical Analysts don't give Buy, Sell or Hold recommendations based on a stock's value, they may provide buy and/or sell trigger signals (together with what price to buy or sell at, the trigger involved and how to manage the trade). but these have nothing to do with the stock's value as is the one in the OP's question.
    – Victor
    Jun 7, 2016 at 9:19
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    Marcus, if a TA just gave a buy or sell signal based on a trigger on a technical indicator to the general public they would be deep in law suits. Unless you follow the system the TA is using to the letter that signal would be useless to you. So what I am saying which you don't seem to understand is that TA don't provide buy/hold/sell recommendations like FA do. In fact they do not give recommendations, they provide signals based on triggers not recommendations like those the OP is asking about. And TAs do not give any hold signal because if you are holding there would be no signal.
    – Victor
    Jun 7, 2016 at 22:08
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    It's simple Marcus, you said in your answer that the Buy/Hold/Sell sliding indicator the OP asked about above is based on a varied bunch of fundamentalists, technical, quant and more analysts, this is not true. Only FA present their recommendations in this way, and I have been trying to explain to you why TA don't do it this way.
    – Victor
    Jun 8, 2016 at 8:17
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It is simply an average of what each analyst covering that stock are recommending, and since they usually only recommend Hold or Buy (rarely Sell), the value will float between Hold and Buy. Not very useful IMHO.

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