Back to top

Image: Bigstock

New Analysts Initiate Coverage: 3 Stock to Watch

Read MoreHide Full Article

The initiation of coverage by new analysts can provide substantial advantages to investors and exert a notable impact on financial markets. Analysts typically possess specialized knowledge and expertise in particular industries or sectors. Through thorough research and analysis, they offer investors critical insights into a company's financial health, growth potential, competitive standing, and industry trends that are often difficult for individual investors to acquire independently.

Compania de Minas Buenaventura S.A.A. (BVN - Free Report) , BrightSphere Investment Group Inc. (BSIG - Free Report) and ServisFirst Bancshares, Inc. (SFBS - Free Report) are three stocks that have recently come under the analytical spotlight, signaling potential opportunities for astute investors.

Analysts don't randomly choose which stocks to cover. Their decision is typically driven by significant investor interest or promising prospects associated with a particular stock.

An interesting observation is that when stocks receive new analyst coverage, they often experience gradual upward price movements compared with those already covered by analysts. The magnitude of this price movement is influenced by the recommendations made by the new analysts. Positive recommendations like ‘Buy’ and ‘Strong Buy’ tend to result in more substantial positive price reactions than ‘Strong Sell,’ ‘Sell,’ or ‘Hold’ recommendations.

When an analyst provides a new recommendation for a company with limited or no prior analyst coverage, investors pay increased attention to the stock. Portfolio managers may become interested in building positions in such stocks due to the fresh information.

Rather than focusing solely on a single recommendation change, it is advisable to consider the average change in broker recommendations. Upgrades, initiations and increased coverage by multiple analysts carry equal significance in assessing a stock's potential.

To create a prudent investment strategy, it's worthwhile to concentrate on the number of analyst recommendations that have increased in recent weeks. This approach can offer valuable insights into the overall sentiment and potential trajectory of a stock, helping investors make well-informed decisions.

Screening Criteria

The Number of Broker Ratings is 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 the volume isn’t enough, it will not attract individual investors).

Here are three out of the six stocks that passed the screen:

Buenaventura: Based in Lima, Peru, this company engages in the exploration, development, construction and operation of mineral processing business. BVN currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BVN shares have gained 83.4% over the past year, outperforming the industry’s 34.3% rise. Earnings per share (EPS) estimates for BSIG have moved north to $1.41 from $1.00 for 2024 in the past 30 days, depicting analysts’ optimism over the company’s prospects. The estimated figure indicates 1,181.8% growth from a year ago.

BrightSphere Investment Group: Headquartered in Boston, MA, this is a publicly-owned asset management holding company. BSIG currently carries a Zacks Rank #3 (Hold).

BSIG’s shares have gained 12.3% over the past year compared with the industry’s 23.8% rise. EPS estimates for BSIG have moved north to $2.31 from $2.22 for 2024 in the past 30 days. Earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 30.5%.

ServisFirst Bancshares: Based in Birmingham, AL, this company serves as the bank holding entity for ServisFirst Bank, offering a range of banking services to individual and corporate clients. SFBS’ shares have gained 21.4% over the past year against the industry’s 5.4% decline.

SFBS currently carries a Zacks Rank #3. EPS estimates for SFBS have moved north to $3.82 from $3.73 for 2024 over the last 30 days. Earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 5.4%.

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 trading. Further, you can also create your 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 of 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

Published in