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Buying Great Under-the-Radar Stocks During the August Market Pullback
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The stock market bounced back on Tuesday following Monday’s market-wide selloff. Stocks were due for a pullback following the huge first-half rally, and the recent wave of selling has helped cool off the market.
Despite the possibility of more near-term selling and volatility, the last several years highlight why investors must attempt to stay exposed to the stock market at all times.
Investors who want to buy stocks in August and the rest of the summer might consider searching for stocks gaining more attention from Wall Street.
The idea is simple: analysts are more inclined to start covering a stock that they view as having big upside potential vs. picking up coverage only to say ‘stay away.’
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 is one of the seven stocks that came through the screen today…
Sensus Healthcare, Inc. ((SRTS - Free Report) ) is a medical device company that’s seen its stock price soar 160% YTD. Sensus Healthcare is a leader in the development and delivery of non-invasive treatments for skin cancer and keloids. The company’s offerings are catching on with patients, with Sensus Healthcare’s revenue projected to surge 43% in FY24 and another 22% next year.
Image Source: Zacks Investment Research
Sensus Healthcare’s adjusted earnings are projected to climb by 900% in 2024 from $0.03 a share to $0.30 a share and then expand by another 70% next year to $0.51 a share. Sensus Healthcare’s consensus earnings estimates for FY24 and FY25 have climbed over the last month, with its most accurate/recent estimates also coming in well above consensus. Sensus Healthcare blew away our bottom-line estimate in three out of the past four quarters.
Sensus Healthcare stock has powered 62% higher since its Q1 release. SRTS stock found support at its 21-day moving average and still trades 66% below its average Zacks price target. All three of the brokerage recommendations Zacks has are “Strong Buys.” Sensus trades at a 35% discount to its three-year median and 40% below its Zacks Medical – Instruments industry at 14.1X forward 12-month earnings.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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
Buying Great Under-the-Radar Stocks During the August Market Pullback
The stock market bounced back on Tuesday following Monday’s market-wide selloff. Stocks were due for a pullback following the huge first-half rally, and the recent wave of selling has helped cool off the market.
Despite the possibility of more near-term selling and volatility, the last several years highlight why investors must attempt to stay exposed to the stock market at all times.
Investors who want to buy stocks in August and the rest of the summer might consider searching for stocks gaining more attention from Wall Street.
The idea is simple: analysts are more inclined to start covering a stock that they view as having big upside potential vs. picking up coverage only to say ‘stay away.’
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 is one of the seven stocks that came through the screen today…
Sensus Healthcare, Inc. (SRTS - Free Report) Stock
SRTS (from 2 analysts four weeks ago to 3)
Sensus Healthcare, Inc. ((SRTS - Free Report) ) is a medical device company that’s seen its stock price soar 160% YTD. Sensus Healthcare is a leader in the development and delivery of non-invasive treatments for skin cancer and keloids. The company’s offerings are catching on with patients, with Sensus Healthcare’s revenue projected to surge 43% in FY24 and another 22% next year.
Image Source: Zacks Investment Research
Sensus Healthcare’s adjusted earnings are projected to climb by 900% in 2024 from $0.03 a share to $0.30 a share and then expand by another 70% next year to $0.51 a share. Sensus Healthcare’s consensus earnings estimates for FY24 and FY25 have climbed over the last month, with its most accurate/recent estimates also coming in well above consensus. Sensus Healthcare blew away our bottom-line estimate in three out of the past four quarters.
Sensus Healthcare stock has powered 62% higher since its Q1 release. SRTS stock found support at its 21-day moving average and still trades 66% below its average Zacks price target. All three of the brokerage recommendations Zacks has are “Strong Buys.” Sensus trades at a 35% discount to its three-year median and 40% below its Zacks Medical – Instruments industry at 14.1X forward 12-month earnings.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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: www.zacks.com/performance_disclosure