Strong Buy: What it is, How it Works, When to use it (2024)

FAQs

What is the meaning of strong buy? ›

A 'strong buy' means the analyst believes the stock's underlying company is or will soon be experiencing positive financial performance and/or favorable market conditions. A strong buy rating indicates an analyst has reason to believe the stock will trade drastically higher over the coming months.

If you believe a company will post strong earnings and expect the stock to rise after the announcement, you could purchase the stock beforehand. Conversely, if you believe a company will post disappointing earnings and expect the stock to decline after the announcement, you could short the stock.

Key Takeaways

Buy and hold investors tend to outperform active management, on average, over longer time horizons and after fees, and they can typically defer capital gains taxes. Critics, however, argue that buy-and-hold investors may not sell at optimal times.

Strong buy means analysts expect the stock to far exceed the average return on the stock market. Moderate buy means the stock is expected to outperform the overall market. Hold means analysts recommend to neither buy nor sell the stock.

“Strong buy” is the rating analysts use for stocks they believe will perform exceptionally well. Analysts rate a stock “outperform” if they believe it will perform better than competitors in the same sector in the coming year. “Underperform” means analysts expect weaker performance compared to the broader market.

The Most Lucrative Day. Many forums will tell you that Monday is the best day to buy stocks, while Friday is the best day to sell stocks. The logic behind this advice is that stock prices are said to be at the lowest on a Monday (meaning you will buy shares at a lower price).

When should you cash out your stocks? ›

Occasionally, markets can get overly optimistic about the future prospects for a business, bidding its stock price to unsustainable levels. When the price of a stock reaches a level that cannot be justified by even the best estimates of future business performance, it could be a good time to sell your shares.

Day traders prefer volatility so they can capitalize on price swings throughout the day. That's why you might read that the best time of day to buy and sell stocks is between 9:30 a.m. and 10:30 a.m. or 3 p.m. and 4 p.m. The first and last hours of trading see much more action than the middle of the day.

Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour. For example, if a stock closed at $40 the previous day, opened at $42 the next, and reached $43 by 10 a.m., this would indicate that the stock is likely to remain above $42 by market close.

The Bottom Line. Panic selling when the stock market is going down is more likely to hurt than help your portfolio. Moreover, you're locking in those losses. This is why it's important to understand your risk tolerance, your time horizon, and how the market works during downturns.

A strong sell is a type of stock trading recommendation given by investment analysts for a stock that is expected to dramatically underperform when compared with the average market return and/or return of comparable stocks in the same sector or industry. It is an emphatic negative comment on a stock's prospects.

: something of value at a favorable price. especially : bargain. It's a real buy at that price. 2. : an act of acquiring possession, ownership, or rights to the use or services of something by payment especially of money : an act of buying (see buy entry 1 sense 1) : purchase.

If something is a good buy, it is of good quality and not very expensive.

One of these tactics is "buying on weakness." This strategy entails buying a long position or covering a short position while a stock is in decline as a preventative measure.