Initiating coverage

Q. What does itmean when a company “initiates coverage” on a stock?

R.I., Redmond, Wash. A. Financial companies such as banks and brokerages often have analysts who research companies and report on their potential as investments. When a bank or brokerage initiates coverage of a company, that means at least one of its analysts has begun to follow the stock and will report on it regularly — often labeling it with a rating, such as “buy,” “hold” or “sell.” (It’s typically rare to see a “sell” rating: The analyst’s employer may not want to insult a company with which it might do business, now or in the future.)

Many brokerages offer gobs of research reports on companies, which can be far more informative than a single one-word rating. Look into what research your brokerage offers, or read up on better brokerages at TheAscent.com.