Overweight (stock market)
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Overweight is part of a three-tiered rating system, along with "underweight" and "equal weight", used by stock analysts to indicate a particular stock's attractiveness. If a stock is deemed "overweight" the analyst is saying, in his opinion, the stock is a better value relative to other stocks he covers in the same sector.[1]
[edit] Examples
Overweight portfolio — if you have 10% of your stocks in Retail, 25% in Manufacturing, 50% in High-Tech, and 15% in Defense, and your broker tells you that High-Tech is "overweight", then your broker is implying that a larger percentage of your stocks should be in High-Tech. This is an example of an "overweight" portfolio, where the investor is being advised to increase their investments in Hi-Tech.
Underweight portfolio — if you have 10% of your stocks in Retail, 25% in Manufacturing, 50% in High-Tech, and 15% in Defense, and your broker tells you that Retail is "underweight", then your broker is implying that a smaller percentage of your stocks should be in Retail. This is an example of an "underweight" portfolio, where the investor is being advised to decrease their investments in Retail.
[edit] References
- ^ Updegrave, Walter. "Glossary please! What do terms like "overweight" and "underweight" mean, anyway?", CNNMoney.com, Ask the Expert, 2003-08-19. Retrieved on 2007-01-03.
