What is "underweight"

1899, from under- + weight.

1. 1 Of an inappropriately or unusually low weight. 2 Not too heavy for an intended purpose. 3 (context finance English) Being less invested in a particular area than market wisdom suggests. n. The state or quality of being #Adjective. v

2. 1 (context transitive English) To underestimate the weight of. 2 (context transitive English) To give insufficient weight to (a consideration); to underestimate the importance of.

adj. having unattractive thinness; "a child with skinny freckled legs"; "a long scrawny neck" [syn: scraggy, scrawny, skinny, weedy]

Underweight is a term describing a person whose body weight is considered too low to be healthy. The definition usually refers to people with a body mass index (BMI) of under 18.5 or a weight 15% to 20% below that normal for their age and height group.

In financial markets, underweight is a term used when rating stock. A rating system may be three-tiered: " overweight," equal weight, and underweight, or five-tiered: buy, overweight, hold, underweight, and sell. Also used are outperform, neutral, underperform, and buy, accumulate, hold, reduce, and sell.

If a stock is deemed underweight, the analyst is saying they consider the investor should reduce their holding, so that it should "weigh" less. For example, if an investor has 10% of their stocks in Retail, 25% in Manufacturing, 50% in Hi-Tech, and 15% in Defense, and the broker says that Retail is "underweight," then they are implying a smaller percentage of the stocks should be in Retail. The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.