a fund manager with a domestic fund house so why do stock broking firms spend so much money to bring out research reports and then give them away for freeso whats the real story we have seen the genuine reasons why stock broking firms bring out research reports but there are other reasons as well as andy kessler writes in the book wall street meat companies report earnings once a quarter but stocks trade around 250 days a year something has to make them move up or down the other 246 days analysts fill that role they recommend stocks change recommendations change earnings estimates pound the table whatever it takes for a sales force to go out with a story so someone will trade with the firm and generate commissionsreports essentially are a medium which allows the sales force of the stock brokerage to go out in the market and sell stocks and how does that help for this investors need to understand the business model of brokers says a veteran stock broker on dalal street the prime objective of a research report is to induce a transaction he addsevery transaction gives broking income to the broker which is his bread and butter a report is a tool to sell stocks says a branch manager at a brokerage housethe buy recommendation in order to sell stocks to investors it is very important for broking firms to keep coming up with buy recommendations on stocks as mitch zacks points out in his book ahead of the market a buy recommendation has more value to a brokerage firm because it gets the brokers on the phone selling stocks to new clients and opening new accountsa buy report ensures that the broking house has a chance to make far more money than it ever would by putting out a sell report on a stock this is because only those investors who have the stock will consider selling it so the income will be limited to that extent this of course does not hold for a buy reportalso at times owners of stock broking firms own shares or the broking house owns shares for its portfolio management services pms clients if a particular stock does not do well it is quite possible that a broking firm may release a buy report on the stock this may tempt investors to buy the stock thus boosting the stock price this will give the owner or the broking house an opportunity to sell out of the stockwhat investors need to be careful about this of course does not mean that no research report can be trusted over a period of time savvy investors learn to separate the wheat from the chaff the brokerage from where the report originates tells me about the quality says alok churiwala a mumbaibased brokerwhile seasoned investors may be able to differentiate one report from another retail investors have to trust their brokerso what should a retail investor do some large brokerages