While trying to make sense of all the information out there about a stock you’re researching, Analyst Opinion can be tricky to understand. At any given point in time, there are multiple opinions present for the same stock, from different-different analyst firms. What Jefferies rates a “Buy”, Nomura may rate a “Strong buy” and Morgan Stanley may rate a “hold” – all on the same day. Individual retail investors are seldom able to make sense of these opinions. And the fact that for some stocks there can be as many as 25 opinions out there, concurrently, does not particularly help. Additionally, there can be as many as 16 different opinions including “Overweight”, “Underweight”, “Sector Perform” .. so on so forth.

So how can an individual investor parse through this quagmire of opinions and make a relatively confident decision!

At Stockal, while creating investing signals to help decision-making, we found out that analyst opinion does carry significant weight and decided to include it under “Expert Opinion” in our mobile apps and “Confidence Meter” on the web platform.

While creating the Confidence Meter, we tried to think like a retail investor would. Simply put – what would an investor wish to know, if she came across 10 different analysts giving their respective opinions on a stock? We also put this question to industry experts along with our early users. And most of the answers we received were around the fact that people wanted to know how well various analysts had generally performed so that they could take the performance into consideration while “weighing” the analyst opinions. Quite natural, don’t you think.

And that’s when the premise of Confidence Meter was established.

So, simply put, Confidence Meter of a stock is an aggregate opinion of major Wall Street analyst firms weighted by their historic performance trend ‘for that stock’.

We cover about 7,000 stocks and about 300 analyst firms. So imagine this like a constantly moving, 7000 X 300 matrix of stocks and analyst firms. And when you ping Stockal to see the confidence meter of a stock, say, Tesla Motors (NASDAQ: TSLA), the value at that point in time (77% as on date) is plucked out of this massive matrix and shown to you.

Essentially, we have analyzed over 300 analyst firms for these 7,000 stocks over the last many years in history and every time an analyst gave an opinion for a firm, we observed if the opinion (which often contains a “price target”) came true or not and to what degree. And rated. Then repeated when the next opinion came out. For every stock and for every analyst. There’s some machine learning magic involved as well but more on that later.

Here’s how Confidence Meter compares with other websites that aggregate analyst opinions:

What others say

Just a snapshot of what everyone is saying. No qualification for correctness, reputation or relationship with price.

What Confidence Meter says

Brings it down to a number that you can use. Chart out its correlation (or causality, in some cases) with the stock price. Clear impact analysis.

So there you have it. We will bring you more analysis and details about our investing signals and parameters. And we will also dig into the Confidence Meter, including perspectives from our data science team and our engineering team, in future posts. Till then, ciao!

For other holistic perspectives on any stocks you’re interested in and for discovering interesting investing opportunities, try Stockal. We’re running a free trial for now – here

At Stockal, we love to watch how markets respond to unique events and how our users (investors - you and old) can make the best use of circumstances to make smart investments. In Thoughts@Stockal, we do deep and broad analysis of such impactful trends and events.

Leave a Reply

Your email address will not be published. Required fields are marked *