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New Analyst Coverage Puts Spotlight on These 5 Stocks
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Coverage initiation on a stock by analyst(s) helps in interpreting information pertaining to capital markets, thereby creating value for investors. Lack of information creates inefficiencies that might trigger misinterpretation of stocks (over- or under-valued).
In fact, coverage initiation usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the microscope definitely has some value.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.
It is to be noted that the average change in broker recommendation is preferred over a single recommendation change.
Influence on Stock Price
It is interesting to note that the price impact of analyst initiation depends on the initial recommendation. Positive recommendations — Buy and Strong Buy — generally lead to a significantly positive price reaction in comparison to Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation. Meanwhile, stocks typically see an upward price movement with a new analyst coverage compared to what is witnessed with a rating upgrade under an existing coverage.
Now, if an analyst gives a new recommendation on a company that has very few or no existing coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage.
Below, we have selected five stocks that have seen increased analyst coverage over the past few weeks.
Screening Criteria
Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago (this will shortlist stocks that have recent new coverage).
Average Broker Rating less than Average Broker Rating four weeks ago ('less than' means 'better than' four weeks ago).
Increased analyst coverage and improving average rating are the primary criteria of this strategy but one should also consider other relevant parameters to make it foolproof.
Here are the other screening parameters:
Price greater than or equal to $5 (as a stock below $5 will not likely create significant interest for most investors).
Average Daily Volume greater than or equal to 100,000 shares (if volume isn’t enough, it will not attract individual investors).
Here are five of the 12 stocks that passed the screen:
NBT Bancorp Inc. (NBTB - Free Report) : Based in Norwich, NY, NBT is a financial holding company. The Zacks Rank #2 (Buy) stock has increased 12.8% year to date compared with the industry’s 32.2% rally. Nonetheless, earnings estimates for the current year have moved up 6.4% over the past 30 days, depicting analysts’ optimism over its prospects. The company’s earnings are expected to grow 39.7% in 2021.
Bio-Rad Laboratories, Inc. (BIO - Free Report) : Based in Hercules, CA, this company develops, manufactures, and markets life science research and clinical diagnostic products. This Zacks Rank #2 stock has gained 36.9% so far this year compared with the industry’s 5.1% growth. Earnings estimates for 2021 have increased 17.6% over the past 30 days. The company’s earnings are expected to grow 35% in 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RadNet, Inc. (RDNT - Free Report) : Based in Los Angeles, CA, RadNet provides outpatient diagnostic imaging services. The stock, which currently carries a Zacks Rank #2, has gained 54.9% year to date against the industry’s 34.1% decline. Earnings estimates for 2021 have moved up 33.3% over the past 30 days. The company’s earnings are expected to surge 461.9% in 2021.
Arbor Realty Trust, Inc. (ABR - Free Report) : This Uniondale, NY-based company invests in a diversified portfolio of structured finance assets in multifamily, single-family rental and commercial real estate markets. The stock, which currently carries a Zacks Rank #2, has gained 28% year to date compared with the industry’s 20.1% rally. Earnings estimates for 2021 have moved up 7.5% over the past 30 days.
Cathay General Bancorp (CATY - Free Report) : Based in Los Angeles, CA, this company operates as the holding company for Cathay Bank. The Zacks Rank #3 (Hold) stock has surged 23.7% year to date compared with the industry’s 35.6% rally. Nonetheless, earnings estimates for the current year have moved up 6.3% over the past 30 days. The company’s earnings are expected to grow 28.6% for the current year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
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New Analyst Coverage Puts Spotlight on These 5 Stocks
Coverage initiation on a stock by analyst(s) helps in interpreting information pertaining to capital markets, thereby creating value for investors. Lack of information creates inefficiencies that might trigger misinterpretation of stocks (over- or under-valued).
In fact, coverage initiation usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the microscope definitely has some value.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.
It is to be noted that the average change in broker recommendation is preferred over a single recommendation change.
Influence on Stock Price
It is interesting to note that the price impact of analyst initiation depends on the initial recommendation. Positive recommendations — Buy and Strong Buy — generally lead to a significantly positive price reaction in comparison to Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation. Meanwhile, stocks typically see an upward price movement with a new analyst coverage compared to what is witnessed with a rating upgrade under an existing coverage.
Now, if an analyst gives a new recommendation on a company that has very few or no existing coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage.
Below, we have selected five stocks that have seen increased analyst coverage over the past few weeks.
Screening Criteria
Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago (this will shortlist stocks that have recent new coverage).
Average Broker Rating less than Average Broker Rating four weeks ago ('less than' means 'better than' four weeks ago).
Increased analyst coverage and improving average rating are the primary criteria of this strategy but one should also consider other relevant parameters to make it foolproof.
Here are the other screening parameters:
Price greater than or equal to $5 (as a stock below $5 will not likely create significant interest for most investors).
Average Daily Volume greater than or equal to 100,000 shares (if volume isn’t enough, it will not attract individual investors).
Here are five of the 12 stocks that passed the screen:
NBT Bancorp Inc. (NBTB - Free Report) : Based in Norwich, NY, NBT is a financial holding company. The Zacks Rank #2 (Buy) stock has increased 12.8% year to date compared with the industry’s 32.2% rally. Nonetheless, earnings estimates for the current year have moved up 6.4% over the past 30 days, depicting analysts’ optimism over its prospects. The company’s earnings are expected to grow 39.7% in 2021.
Bio-Rad Laboratories, Inc. (BIO - Free Report) : Based in Hercules, CA, this company develops, manufactures, and markets life science research and clinical diagnostic products. This Zacks Rank #2 stock has gained 36.9% so far this year compared with the industry’s 5.1% growth. Earnings estimates for 2021 have increased 17.6% over the past 30 days. The company’s earnings are expected to grow 35% in 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RadNet, Inc. (RDNT - Free Report) : Based in Los Angeles, CA, RadNet provides outpatient diagnostic imaging services. The stock, which currently carries a Zacks Rank #2, has gained 54.9% year to date against the industry’s 34.1% decline. Earnings estimates for 2021 have moved up 33.3% over the past 30 days. The company’s earnings are expected to surge 461.9% in 2021.
Arbor Realty Trust, Inc. (ABR - Free Report) : This Uniondale, NY-based company invests in a diversified portfolio of structured finance assets in multifamily, single-family rental and commercial real estate markets. The stock, which currently carries a Zacks Rank #2, has gained 28% year to date compared with the industry’s 20.1% rally. Earnings estimates for 2021 have moved up 7.5% over the past 30 days.
Cathay General Bancorp (CATY - Free Report) : Based in Los Angeles, CA, this company operates as the holding company for Cathay Bank. The Zacks Rank #3 (Hold) stock has surged 23.7% year to date compared with the industry’s 35.6% rally. Nonetheless, earnings estimates for the current year have moved up 6.3% over the past 30 days. The company’s earnings are expected to grow 28.6% for the current year.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
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