In the Language of Brokers, A 'Buy' May Mean 'Hold'

Many investors complain that analysts' opinions on stocks are confusing because their evaluation systems lack a uniform standard.

Brokerages usually use a range of terms when recommending or warning about a stock, including "underperform," "market perform" or "outperform" in addition to "buy" and "sell." The opinions are based on the stock's expected return compared with the market average.

But the systems they use to determine those opinions can differ significantly.

Samsung Securities Co. uses four terms for its recommendations. The brokerage puts a "market underperform" label on a share if its expected rate of return falls short of the market average by more than 10 percent.

It tacks on "market perform" if a stock's anticipated yield is within 10 percent of the average. The brokerage says "buy" if the return is expected to outpace the average by between 10 and 20 percent and "strong buy" if the yield is expected to be 20 percent higher.

By contrast, LG Investment & Securities uses five opinions. The brokerage says "strong sell" if the stock is expected to underperform the market by more than 20 percent. It says "sell" if it predicts the stock to return at 5 to 20 percent below average.

If the anticipated yield is within 5 percent of the market average, LG Investment says "hold."

It says "buy" if it sees the stock returning 5 to 20 percent more than the market and "strong buy" if it is expected to outperform the market by more than 20 percent.

Similarly, other brokerages, such as Good Morning Securities and SK Securities, have differing recommendation systems and use different terminology.

"The opinions should be standardized and made simpler for investors," said Bae Hyeon-gi at Samsung Securities' research center.

by Kim Dong-sun