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Lack of information for stocks acts against investors as it might result in misinterpretation of stocks (over- or under-valued). Thus, initiation of coverage by analysts offers critical information on a stock which is of great value to investors.
Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts’ attention. In other words, they believe that the company coming under the microscope definitely has some value.
Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investors’ focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t love to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly added stocks are more favorable than their ratings on continuously covered stocks.
It is needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Price Movement
The price movement of a stock generally depends on the recommendations on it from new analysts. Usually, stocks see an upward price movement on new analyst coverage compared to what they witnessed with a rating upgrade under an existing coverage. Positive recommendations – Buy and Strong Buy – generally lead to a significantly positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
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.
Below, we have selected five stocks that have seen increased analyst coverage over the last 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 consider other relevant parameters to make the strategy 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 21 stocks that passed the screen:
Sandy Spring Bancorp, Inc. (SASR - Free Report) , a bank holding company for Sandy Spring National Bank of Maryland, has rallied 42.7% in the last one year, outperforming the Zacks classified Banks-Northeast industry’s 38.1% gain. Over the last 60 days, the Zacks Consensus Estimate for earnings rose 4.2% to $2.48 for 2017 and 6.9% to $2.77 for 2018. Positive earnings estimate revisions for 2017 and 2018 along with an expected earnings growth rate of 23.8% for 2017 and 11.7% for the next indicate the stock’s potential for further price appreciation. The stock sports a Zacks Rank #1 (Strong Buy).
Gray Television, Inc. (GTN - Free Report) is a communication provider headquartered in Atlanta, GA. This Zacks Rank #1 stock climbed 25.6% so far this year, faring a lot better than the zacks classified Broadcasting -Radio/TV industry’s 9% gain. This stock saw positive earnings estimate revision of 9.6% for this year and 5.5% for the next over the past 60 days.
First American Financial Corporation (FAF - Free Report) , a financial services provider, has returned over 20% year to date, much better than the Zacks categorized Insurance-Property & Casualty industry’s 5.5% addition. The stock carries a Zacks Rank #1. Over the last 60 days, the Zacks Consensus Estimate for earnings rose 13.1% for 2017 and 11.7% for 2018. It also has an impressive expected earnings growth rate of 13% for the next five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
RTI Surgical, Inc. is a surgical implant company. The stock has gained almost 62% year to date, outperforming the Medical Instrument Industry’s 16.9% rise. The company carries a Zacks Rank #3 (Hold) and has a 3-5 year expected EPS growth rate of 15%. For 2017, the company’s earnings are expected to grow 75% and 78.6% in 2018.
International Seaways, Inc. (INSW - Free Report) is one of the leading tanker companies worldwide, providing energy transportation services for crude oil and petroleum products in International Flag markets. The company’s stock price has jumped 43.3% so far this year, outperforming the Zacks Transportation-Ship industry’s 7.2% drop. The company – with a Zacks Rank #3 – has seen positive earnings estimate revisions of 24 cents for this year and 39 cents for the next over the past 60 days.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Stocks to Gain on New Analyst Coverage
Lack of information for stocks acts against investors as it might result in misinterpretation of stocks (over- or under-valued). Thus, initiation of coverage by analysts offers critical information on a stock which is of great value to investors.
Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts’ attention. In other words, they believe that the company coming under the microscope definitely has some value.
Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investors’ focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t love to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly added stocks are more favorable than their ratings on continuously covered stocks.
It is needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Price Movement
The price movement of a stock generally depends on the recommendations on it from new analysts. Usually, stocks see an upward price movement on new analyst coverage compared to what they witnessed with a rating upgrade under an existing coverage. Positive recommendations – Buy and Strong Buy – generally lead to a significantly positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
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.
Below, we have selected five stocks that have seen increased analyst coverage over the last 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 consider other relevant parameters to make the strategy 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 21 stocks that passed the screen:
Sandy Spring Bancorp, Inc. (SASR - Free Report) , a bank holding company for Sandy Spring National Bank of Maryland, has rallied 42.7% in the last one year, outperforming the Zacks classified Banks-Northeast industry’s 38.1% gain. Over the last 60 days, the Zacks Consensus Estimate for earnings rose 4.2% to $2.48 for 2017 and 6.9% to $2.77 for 2018. Positive earnings estimate revisions for 2017 and 2018 along with an expected earnings growth rate of 23.8% for 2017 and 11.7% for the next indicate the stock’s potential for further price appreciation. The stock sports a Zacks Rank #1 (Strong Buy).
Gray Television, Inc. (GTN - Free Report) is a communication provider headquartered in Atlanta, GA. This Zacks Rank #1 stock climbed 25.6% so far this year, faring a lot better than the zacks classified Broadcasting -Radio/TV industry’s 9% gain. This stock saw positive earnings estimate revision of 9.6% for this year and 5.5% for the next over the past 60 days.
First American Financial Corporation (FAF - Free Report) , a financial services provider, has returned over 20% year to date, much better than the Zacks categorized Insurance-Property & Casualty industry’s 5.5% addition. The stock carries a Zacks Rank #1. Over the last 60 days, the Zacks Consensus Estimate for earnings rose 13.1% for 2017 and 11.7% for 2018. It also has an impressive expected earnings growth rate of 13% for the next five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
RTI Surgical, Inc. is a surgical implant company. The stock has gained almost 62% year to date, outperforming the Medical Instrument Industry’s 16.9% rise. The company carries a Zacks Rank #3 (Hold) and has a 3-5 year expected EPS growth rate of 15%. For 2017, the company’s earnings are expected to grow 75% and 78.6% in 2018.
International Seaways, Inc. (INSW - Free Report) is one of the leading tanker companies worldwide, providing energy transportation services for crude oil and petroleum products in International Flag markets. The company’s stock price has jumped 43.3% so far this year, outperforming the Zacks Transportation-Ship industry’s 7.2% drop. The company – with a Zacks Rank #3 – has seen positive earnings estimate revisions of 24 cents for this year and 39 cents for the next over the past 60 days.
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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »