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.

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.

References

External links

• CNNMoney.com
• CNN Ask an Expert