The Altium Limited (ASX: ALU) share price is down 8% today despite the software business releasing no specific news to the market. The tech-heavy NASDAQ index did fall around 2% last Friday night, but that is probably not the only reason why shareholders are hitting the sell button on Altium today.
According to the New Corp media sell-side brokerage and research house Bell Potter has cut its rating on Altium to ‘hold’.
Once an influential broker publicises its ratings it can lead to retail or ‘mum and dad’ investors following the advice to buy, hold, or sell.
However, following sell-side broker tips like this can often lead to buy high, sell low returns, and high trading costs due to the short-term focus of sell-side research analysts constantly changing price targets or ratings based on share price movements or short-term issues.
For example anyone selling today with the stock down 8% may find they can only buy the stock back at a higher price if another broker upgrades their rating or sentiment shifts on the back of a rally in NASDAQ-listed technology stocks tonight.
Generally, it’s better to take a buy-to-hold approach to investing assuming you only focus on high-quality companies that should have a strong record of share price appreciation by virtue of the operational performance that normally only correlates with high quality.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia has recommended or owns Altium, Computershare & Technology One. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.