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Originally published Saturday, December 10, 2011 at 10:00 PM

Coming to terms: Initiated coverage

The Motley Fool

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Q: What does it mean when a company has "initiated coverage" on a particular stock?

A: Big brokerages and investment banks typically employ analysts to follow and study various companies. The analysts issue recommendations that are passed on to clients and others.

When a brokerage initiates coverage of a company, it just means that the company is now being followed by the firm and that the brokerage has an opinion on it (perhaps "Buy," "Hold" or "Sell"). There may also be a detailed research report available on the stock, which is typically much more illuminating than a simple one-word rating.

"Sell" ratings have long been relatively rare. That's because since these ratings usually come from organizations with investment-banking operations, the organizations haven't wanted to burn any bridges with current or potential investment-banking clients by being too negative.

Many brokerages offer gobs of research reports on companies. See what yours offers, or look for a better brokerage.

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