Ratings

Harbinger Research employs a traditional rating system, which allows us to accurately express our views as to the attractiveness of a potential investment, from both an opportunity perspective, and a risk perspective. Our ratings include: Strong Buy, Buy, Strong Speculative Buy, Speculative Buy, Neutral, Sell, and Strong Sell. We do not under any circumstances “sell” our ratings to those who enroll public companies for research coverage, since in the end much of our value stems from our credibility on the Street.

Basis of Analysis

In arriving at an investment rating, we use the following two analytical measures:

  1. Magnitude of Opportunity. This is our assessment of how compelling we believe a company’s potential/probable future is, relative to its current price. Note that our views can include a company having a compellingly negative future as well as a compellingly positive one.
  2. Riskiness. When analyzing a company, we consider many forms of risk. These forms of risk (or uncertainty) include:
    1. Business Risk: The “riskiness” inherent in the company’s business plan, based on its competitors, its industry, its current market position, the rate of change in related industries, and the “future uncertainty” of several other factors.
    2. “Future Results” Uncertainty: The risk we view as being inherent in the process of estimating the company’s future financial results. Biotech companies and many early-stage technology companies are typically characterized by high levels of this type of risk.

For example, we may strongly believe that a company will be the winner in its emerging market, and that it will be a very large market, and yet find it nearly impossible to quantify its likely future financial results. Such a company would have very low risk of the first type, but very high risk of the second type. We would probably rate such a company Strong Speculative Buy.

Explanation of Ratings Issued by Harbinger Research
STRONG BUY We issue a Strong Buy rating when we believe a company's future business results are likely to drive relative price appreciation of at least 35% relative to the general market for U.S. equities during our investment time horizon. We will issue this rating only when we believe the risk/reward ratio is exceptionally attractive, and the overall risk to be low or moderate.
BUY We issue a Buy rating when we believe a company's future business results are likely to drive relative price appreciation of at least 15% relative to the general market for U.S. equities during our investment time horizon. We will issue this rating only when we believe the risk/reward ratio is attractive, and the overall risk to be low or moderate.
STRONG SPECULATIVE BUY We issue a Strong Speculative Buy rating when we believe a company's future business results are likely to drive relative price appreciation of at least 75% relative to the general market for U.S. equities during our investment time horizon, and we believe that the risk/return tradeoff is compelling. However, unlike a Strong Buy rating, we issue this rating when we perceive high or very high risk in the future operations and results of the company, which may stem from future events such as a key FDA approval or the results of litigation.
SPECULATIVE BUY We issue this rating when the risk/reward tradeoff is somewhat less compelling than that required for a Strong Speculative Buy rating. These companies tend to have very high upside potential, but also a great degree of risk or uncertainty with regard to future financial results.
NEUTRAL

We issue a Neutral rating in the following cases:

  1. We perceive low risk/variability in the likely future results of the company, but based on that perception, believe its shares are fairly valued.
  2. We believe that despite somewhat-to-very compelling potential upside, on a risk-adjusted basis the company's shares are fairly valued or overvalued at this time.
  3. Due to the very early stage of the company's operations, we simply do not have any confidence whatsoever in our ability to estimate potential revenues, earnings, or business risk.
SELL

We issue a Sell rating when we have fairly high or high confidence in our ability to estimate the company's future financial results, and we believe the company is significantly overvalued relative to its benchmark based on our estimates.
STRONG SELL

We issue a Strong Sell rating when we feel that the market is highly overvaluing shares in the covered company. Such a view may stem from an "irrational" run-up in the shares due to market overreaction, or many other factors. We will not issue a Sell or a Strong Sell when we believe there is a compelling "long" story in the stock.