Free Broker Research

Broker Research

Free broker research can be immensely useful for both trading beginners and those who are more experienced in the markets but are looking for different strategies in order to improve their returns. The stock research can often be obtained through brokers who own the research, for example Comsec in Australia, and since it costs nothing, there are only rewards to be reaped for you. The stock research often contains details the company, what the future catalysts for price movements are, what their target price is and whether they recommend buying or selling the company in the short, medium or long term. Whilst this is great, there are a few significant drawbacks that you should be wary of.

Whilst the information is likely to be of a very high quality (that’s why they’re still in business), it doesn’t always come from those most in the know. The research team that can afford to go to the mine to inspect it will have a better insight than those who asked for a report of it via email. Naturally those that did the inspection personally can’t afford to provide their research for free and so you generally end up receiving the lower quality information. Your best bet is always to go through your list of contacts and see if anyone may be subscribed to a newsletter or research that would be beneficial to you, as this can give you access to higher quality research.

The Key Drawback

The other important thing to always remember is that the research that you receive as the retail investor has been seen by 90% of the other market participants before you (remembering that 20% of the participants often make up over 80% of the market volume). When research is published it is first provided to the employers of the research firm, then sold to their clients and traders at other institutions, and then handed around for the rest of the world to see.  Whilst this is not ideal, it’s certainly not a problem if you remember to take this into account.

If a trade note contains something revolutionary, and no one is buying the stock, take a second look at it and try to work out what the likelihood of the profit inducing event occurring is. Chances are it wasn’t as high as the opening paragraph made out, or everyone knew about it before the research came out and already owns the stock. Once you accept that you won’t make money relying on being the first one onto a good story you can filter out the information that’s useful to you. If the company is winning contracts and expanding its market share, the research may suggest that that will continue, giving the price a boost long after the research was published.

Knowing where your strengths and weaknesses lie is crucial to successful trading. If you can’t be the first onto the information, learn how to filter out the useful parts. And most of all, give it a go. Even if you just note the idea down and a year later look back and see if you were right or not, you should always have a go! 

In the pipeline: How to begin picking stocks

Bullish on: Apple (AAPL: big run up but still trades at lower multiples than when it first listed) 

Bearish on: USDJPY (big gains on the back of Bank of Japan stimulus, but underlying fundamentals should drive it lower)

As always please feel to leave any comments or feedback that you may have and I’ll get back to them as soon as possible. If you are looking for more trading strategies, try www.pimmtrading.blogspot.com.