JP Morgan gave the Specialty Chemicals industry some bad news as it announced a downgrade on one of its stocks.

Innospec Inc. (IOSP) [Chart - News - Analysis] was downgraded from Overweight » Neutral on 11/2/2009---a negative sign for the stock that investors will have to endure. FYI, JP Morgan uses the following rating scale when analyzing stocks: Overweight, Neutral, Underweight.

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Innospec Inc. has an average analyst recommendation score of 2.0 and competes for investment dollars with Lubrizol Corp. (LZ) [Chart - News - Analysis] and Sigma-Aldrich Corporation (SIAL) [Chart - News - Analysis]---two other stocks in the Specialty Chemicals industry that have average analyst recommendation scores of 2.3 and 2.5 respectively.

Analyst recommendations are averaged and scored using the following rating scale:

- 1.0 = Strong Buy

- 2.0 = Buy

- 3.0 = Hold

- 4.0 = Sell

- 5.0 = Strong Sell

Why are Upgrades and Initiations Good and Downgrades Bad?

One event that is almost certain to get a reaction from Wall Street is an analyst upgrade or downgrade. Everyone is looking for an edge in the stock market, and quite often, traders turn to stock analysts to get that edge.

Upgrades and coverage initiations are typically good for stocks because they show that analysts either believe that the stock is going to perform better in the future or that the stock is worth covering and providing analysis on.

Downgrades are typically bad for stocks because they show that analysts believe that the stock is going to perform worse in the future.

What is a Stock Analyst?

Check out the Understanding Stock Analyst Research and Recommendations video and article for more info.

A stock analysts is a person---typically employed by a large bank, investment firm or analysis company---who devotes his/her life to learning and making predictions about a company and its future performance.

Stock analysts sift through company reports and filings, talk to company management, probe customers and competitors and basically do whatever they can to find out if a company is healthy and growing or sick and shrinking. Because this is incredibly demanding work, stock analysts typically only monitor one or two companies at a time.

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