Best Guide to Mutual Funds
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Underweight stocks

The descriptive term "underweight" is one of three characterizations routinely used in a tiered rating system applied to stocks and securities by financial analysts as an indication of the given stock's desirability or attractiveness as an investment relative to other stocks in the particular investment sector or genre.

If a stock is designated as "underweight" the analyst is indicating that in his opinion the stock has an inferior value to other stocks in the same sector. Conversely, if the term "overweight" is used by the analyst, the indication is that the performance of the stock in question is superior to other stocks in the given sector.

The third term that may be applied by stockbrokers in advising their clients or by analysts in issuing opinions is "equal weight." This terminology indicates that the analyst or broker regards the stock to be, all things considered, equal in performance to other stocks in the same sector.

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