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Find Strong Stocks to Buy in the Bear Market with New Analyst Coverage
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Stocks climbed through early afternoon Tuesday to start a holiday-shortened trading week. The jump followed the S&P 500’s worst week since the initial covid selloff in March 2020. The fall came on the back of the hotter-than-projected May CPI report and the Fed’s decision to raise its core interest rate by 0.75% for the first time since 1994.
The S&P 500 officially enter a bear market on June 13. Bear markets are, of course, regular and healthy parts of investment cycles. Even though they are always rough in the moment, the downturns offer investors with long-term horizons the chance to buy stocks at discounts they plan to hold for years. And there are still pockets of the market doing well in 2022.
Broader consumer sentiment is tanking as people stare at sky-high prices at the gas pump and beyond. But many key economic indicators remain strong and the Fed and others are still calling for U.S. GDP growth in 2022 and 2023.
Investors looking to buy stocks still need to be as selective as always. Today we utilized our new analyst coverage screen to help find potential winners with the S&P 500 now in a bear market. These stocks are gaining more attention from Wall Street analysts during the market downturn and might prove to be solid additions.
New Analyst Coverage
Broker recommendations play their part no matter how investors feel about them. And we seemingly all take a look no matter what. Individual investors, large institutional portfolio managers, and everyone in between are likely pleased to see one of their stocks get an upgraded rating or a new analyst cover the company.
Investor interest can generate more analyst coverage. This helps explain why analysts jump on young, much-hyped and talked about tech companies. Then, as new coverage is initiated, the company and the stock become more visible, which in turn often leads to more demand potential and therefore the possibility of higher prices.
Plus, analysts almost always initiate coverage with a positive recommendation. And the logic follows because why spend all the time and write a research report on a company not widely tracked only to say it’s not good?
When it comes to companies with little to no analyst coverage, one new recommendation can sometimes give portfolio managers the validation they need to build a position. And the more money they can invest, the more they can potentially influence prices.
The best way to use this information is to search for companies with analyst coverage that has increased over the last 4 weeks. We just look at the number of analyst recommendations today and compare it to the number of analyst recommendations 4 weeks ago.
The rule of thumb here is that an increase in coverage leans bullish and a decrease signals bearish behavior. It is also worth pointing out that, in general, the change in the average broker recommendation is a better indicator than the actual recommendation itself.
On top of that, it is typically more bullish if the increase went from none to one or if the coverage was minimal to begin with. (As the number of analysts climbs the addition of new coverage isn’t earth-shattering.) In the end, increased coverage is still better than decreased coverage, unless the coverage is heading in the wrong direction.
Now let’s try this screen…
• Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago
(This shows stocks where new coverage has recently been added.)
• Average Broker Rating less than Average Broker Rating four weeks ago
(By 'less than', we mean 'better than' four weeks ago.)
• Prices greater than or equal to 5
(We’re applying all of the above parameters to stocks above $5 a share since many money managers won't even look at stocks under $5)
• Average Daily Volume greater than or equal to 100,000 shares
(If there's not enough volume, even individual investors won't want it).
Here are two of the 17 stocks that came through the screen today…
Arconic Corporation - (from 2 analysts four weeks ago to 4)
Arconic Corporation is a leading provider of aluminum sheet, plate, and extrusions. Arconic also sells more innovative architectural products that aim to help “advance the ground transportation, aerospace, building and construction, industrial and packaging end markets.” The company started trading in the early part of 2020 following the separation of Arconic into two standalone companies, Arconic Corporation and Howmet Aerospace (HWM).
ARNC shares have surged 69% in the past two years to outpace its Zacks Econ sector and roughly match its highly-ranked Metal Products–Distribution space that currently sits in the top 5% of over 250 Zacks industries. Arconic has pulled back in 2022, but Zacks estimates call for a big year of top and bottom-line expansion, with another strong year of earnings growth projected in 2023. Arconic is also trading near its lows at 8.8X forward 12-month earnings, which marks a 35% discount to its industry.
Consol Energy (CEIX - Free Report) - (from 1 analyst four weeks ago to 3)
Consol Energy (CEIX - Free Report) is a producer and exporter of high-Btu bituminous thermal coal and metallurgical coal. Consol Energy owns and operates some of the most productive longwall mining operations in the Northern Appalachian Basin and it is developing a new metallurgical coal mine in the Central Appalachian Basin. CEIX’s Coal industry is currently in the top 11% of over 250 Zacks industries, as energy prices soar in the U.S. and beyond.
Consol shares have skyrocketed 830% in the last 24 months to blow away the Oil and Energy sector’s 55% run and its industry’s 313%. Even though it’s soared, CEIX trades at 2.9X forward 12-month earnings vs. its industry’s 3.6X and the Oil-Energy’s 6.3X. Zacks estimates call for its revenue to surge 37% this year and 30% next year to hit $2.2 billion. Meanwhile, its adjusted earnings are projected to climb 360% in FY22 and another 137% in FY23 to hit $22.46 a share.
Many screeners won't let you search for the number of analysts covering a stock, let alone comparing the amount of coverage they had weeks or even months ago. But you can with the Research Wizard. And you can backtest it all. Find out how to pick the right stocks right now by taking a free trial to the Research Wizard stock picking and backtesting program.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Image: Bigstock
Find Strong Stocks to Buy in the Bear Market with New Analyst Coverage
Stocks climbed through early afternoon Tuesday to start a holiday-shortened trading week. The jump followed the S&P 500’s worst week since the initial covid selloff in March 2020. The fall came on the back of the hotter-than-projected May CPI report and the Fed’s decision to raise its core interest rate by 0.75% for the first time since 1994.
The S&P 500 officially enter a bear market on June 13. Bear markets are, of course, regular and healthy parts of investment cycles. Even though they are always rough in the moment, the downturns offer investors with long-term horizons the chance to buy stocks at discounts they plan to hold for years. And there are still pockets of the market doing well in 2022.
Broader consumer sentiment is tanking as people stare at sky-high prices at the gas pump and beyond. But many key economic indicators remain strong and the Fed and others are still calling for U.S. GDP growth in 2022 and 2023.
Investors looking to buy stocks still need to be as selective as always. Today we utilized our new analyst coverage screen to help find potential winners with the S&P 500 now in a bear market. These stocks are gaining more attention from Wall Street analysts during the market downturn and might prove to be solid additions.
New Analyst Coverage
Broker recommendations play their part no matter how investors feel about them. And we seemingly all take a look no matter what. Individual investors, large institutional portfolio managers, and everyone in between are likely pleased to see one of their stocks get an upgraded rating or a new analyst cover the company.
Investor interest can generate more analyst coverage. This helps explain why analysts jump on young, much-hyped and talked about tech companies. Then, as new coverage is initiated, the company and the stock become more visible, which in turn often leads to more demand potential and therefore the possibility of higher prices.
Plus, analysts almost always initiate coverage with a positive recommendation. And the logic follows because why spend all the time and write a research report on a company not widely tracked only to say it’s not good?
When it comes to companies with little to no analyst coverage, one new recommendation can sometimes give portfolio managers the validation they need to build a position. And the more money they can invest, the more they can potentially influence prices.
The best way to use this information is to search for companies with analyst coverage that has increased over the last 4 weeks. We just look at the number of analyst recommendations today and compare it to the number of analyst recommendations 4 weeks ago.
The rule of thumb here is that an increase in coverage leans bullish and a decrease signals bearish behavior. It is also worth pointing out that, in general, the change in the average broker recommendation is a better indicator than the actual recommendation itself.
On top of that, it is typically more bullish if the increase went from none to one or if the coverage was minimal to begin with. (As the number of analysts climbs the addition of new coverage isn’t earth-shattering.) In the end, increased coverage is still better than decreased coverage, unless the coverage is heading in the wrong direction.
Now let’s try this screen…
• Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago
(This shows stocks where new coverage has recently been added.)
• Average Broker Rating less than Average Broker Rating four weeks ago
(By 'less than', we mean 'better than' four weeks ago.)
• Prices greater than or equal to 5
(We’re applying all of the above parameters to stocks above $5 a share since many money managers won't even look at stocks under $5)
• Average Daily Volume greater than or equal to 100,000 shares
(If there's not enough volume, even individual investors won't want it).
Here are two of the 17 stocks that came through the screen today…
Arconic Corporation - (from 2 analysts four weeks ago to 4)
Arconic Corporation is a leading provider of aluminum sheet, plate, and extrusions. Arconic also sells more innovative architectural products that aim to help “advance the ground transportation, aerospace, building and construction, industrial and packaging end markets.” The company started trading in the early part of 2020 following the separation of Arconic into two standalone companies, Arconic Corporation and Howmet Aerospace (HWM).
ARNC shares have surged 69% in the past two years to outpace its Zacks Econ sector and roughly match its highly-ranked Metal Products–Distribution space that currently sits in the top 5% of over 250 Zacks industries. Arconic has pulled back in 2022, but Zacks estimates call for a big year of top and bottom-line expansion, with another strong year of earnings growth projected in 2023. Arconic is also trading near its lows at 8.8X forward 12-month earnings, which marks a 35% discount to its industry.
Consol Energy (CEIX - Free Report) - (from 1 analyst four weeks ago to 3)
Consol Energy (CEIX - Free Report) is a producer and exporter of high-Btu bituminous thermal coal and metallurgical coal. Consol Energy owns and operates some of the most productive longwall mining operations in the Northern Appalachian Basin and it is developing a new metallurgical coal mine in the Central Appalachian Basin. CEIX’s Coal industry is currently in the top 11% of over 250 Zacks industries, as energy prices soar in the U.S. and beyond.
Consol shares have skyrocketed 830% in the last 24 months to blow away the Oil and Energy sector’s 55% run and its industry’s 313%. Even though it’s soared, CEIX trades at 2.9X forward 12-month earnings vs. its industry’s 3.6X and the Oil-Energy’s 6.3X. Zacks estimates call for its revenue to surge 37% this year and 30% next year to hit $2.2 billion. Meanwhile, its adjusted earnings are projected to climb 360% in FY22 and another 137% in FY23 to hit $22.46 a share.
Many screeners won't let you search for the number of analysts covering a stock, let alone comparing the amount of coverage they had weeks or even months ago. But you can with the Research Wizard. And you can backtest it all. Find out how to pick the right stocks right now by taking a free trial to the Research Wizard stock picking and backtesting program.
Click here to sign up for a free trial to the Research Wizard today.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.