In this clip from Industry Focus: Tech, Dylan Lewis is joined by senior technology specialist Evan Niu as they explain the difference between buy-side and sell-side analysts and what investors need to know about the research that comes from Wall Street.

A full transcript follows the video.

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This video was recorded on March 31, 2017.

Dylan Lewis: Shares of Snap enjoyed a nice little bump earlier this week thanks to some analyst coverage which seemed to give the stock a pretty rosy outlook. For today's show, I figure we'll talk a little bit about the sell-side analysts, and the life of the sell-side analysts, the people that are putting out these research notes, and run through the recent research we've seen and how we feel about it and how it jibes with some of the stuff we've read and our own opinions. Before we get too far into the discussion, I think there are probably some listeners out there that aren't super familiar with the buy-side/sell-side dynamics of the investment industry. Do you want to run through that first?

Evan Niu: Sure. Basically, the buy-side are analysts that are working for funds that are actually buying the stocks. They're the ones that actively have money in whatever they're picking. The sell-side analysts are the guys you see on TV, the research notes you hear put out. Those analysts work at banks or investment firms and all they do is do the research and try to sell that research to the buy-side. The sell-side usually cannot own any of the stocks that they research for objectivity purposes. A lot of the times, what they try to do is try to get the buy-side to come trade at their brokerage, and then the sell-side analysts get a small percentage of the commissions that those clients pay. And often, they will pay inflated commissions on purpose through an arrangement called soft dollars, which, from the fund's perspective, shifts costs from the management side to the investors. It's kind of a shady thing that's always been there, but that's just the way it works. [laughs]

Lewis: So, when we see these notes coming out, or, when we see new price targets, these are all coming from the sell-side analysts, and this is them publishing research. Really, it's a client book-building method for them, and it's a way to build buzz about companies that they're following, and put out their thoughts on them.

Niu: Exactly. It's more or less just trying to get exposure, marketing pitch, to say, "We have this really good research," and try to attract more clients to buy that research, whereas a buy-side analyst, if a buy-side analyst does their own research, let's say they do a super deep dive and they have some information they think is super valuable, obviously, they're not just going to advertise it, they're going to go act on it and try to make money on it, if they have better information than the rest of the market. That's the goal. But, yeah, so, they're not going to be the ones that are out there talking up too much. Of course, sometimes you see people on TV that are like, so-and-so capital management. They do like to go out there and be seen in the media. But most of the time when you hear about price targets, readings, underweight, overweight, buy, hold, whatever, that stuff is all sell-side.