Sage words

By THIS IS MONEY
Updated:

 

What effect would the issue of a brokers note on Sage have on its shares? S, Newcastle.

Jeremy Batstone, senior analyst at NatWest Stockbrokers says: Generally, brokers notes either recommend selling or buying, or come after the release of financial information (in which case recommendations can include hold or how it is expected to perform it he market).

The impact of the release of a note varies according to many factors including the weight ascribed to the institution itself and the regard in which it is held and the timing of the note. Sometimes notes can have a disproportionate impact on a share when issued at a particularly sensitive time. This tends to be more likely with sell notes than buy notes.

When market conditions are buoyant, a positive note on a stock such as Sage could have a very significant positive impact. When conditions are less buoyant, the impact of the note on the share price is likely to be more muted (but need not always be!).

Perhaps it helps if you know the reason the broker produced the note. Does he want the corporate business? Is the market maker long of stock he doesn't want? Is the analyst's own reputation up for consideration (at annual awards, for instance)?

Investigations have shown that there could be problems associated with taking the views of 'sell side' brokers' research too literally. By all means read it and take note of it, but where possible, don't avoid doing your own homework too.

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