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Why Analyst Buy-Sell-Hold Ratings are Flawed


Earlier Thursday morning, when I saw an analyst had upgraded Best Buy from an underperform to neutral, I tweeted: “No guts no glory. Either buy or sell. "Neutral" should be eliminated from the ranking system.”

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That prompted my colleague and sometimes sparring partner Jim Cramer to tweet back: “Most stocks are just neutrals, no reason to own no reason to sell. Neutral rating makes sense...”



To which I responded: “Neutral is like a holding pattern over JFK. Just land the damn thing already. Going from sell to neutral is the chicken's way out.”

I get what ratings are all about. If I were an analyst I’d probably want a way to inch in or out of a stock without fully committing one way or the other.

But I’ve never been a fan of the mealy-mouthed “neutral,” “hold” or whatever you want to call it.

Which got me thinking — there has to be a better way of rating stocks. I’m calling it the Greenberg Stock Rating System and it’s really very simple: Own or Don’t Own.

It makes so much sense, I can’t believe I’m only thinking of this now.

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Disclaimer

  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • CNBC's Senior Personal Finance Correspondent

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.