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New Analyst Coverage Puts Spotlight on These 4 Stocks
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As analysts are the key information intermediaries in capital markets, initiation of coverage by them offers critical information on a stock which is of great value to investors.
Coverage initiation by analyst(s) on a stock portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts’ interest. In other words, they believe that the company coming under coverage has value that can’t be ignored.
Obviously, stocks are not randomly chosen to cover. New coverage 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 ratings on continuously covered stocks.
It is worth mentioning here that the average change in broker recommendation is always preferred over a single recommendation change.
New Analyst Coverage & Impact on Price Movement
The price movement of a stock is the function of the recommendations on it from new analysts. Typically, stocks see an upward price movement on new analyst coverage compared to what was 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.
Meanwhile, investors start paying more attention to the stock (that has very few or no existing coverage) on which an analyst provides a new recommendation. 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 four of the five stocks that passed the screen:
Camtek Ltd. (CAMT - Free Report) designs, develops, manufactures, and markets automatic optical inspection systems and related products. The stock sports a Zack Rank #1 (Strong Buy) and has gained more than 19% in the past six months, outperforming the industry’s 9.5% rally. Earnings estimates have moved 11.4% north for 2018 and 8.8% for 2019 in the last 30 days, depicting the stock’s potential to scale higher. Full-year 2018 and 2019 earnings for the company are expected to grow 81.5% and 25.5%, respectively.
Progenics Pharmaceuticals, Inc. develops medicines and other technologies to treat cancer in the United States and internationally. The stock carries a Zacks Rank #3 (Hold) and has advanced 19.9% in the last six months, faring much better than its industry’s 6.8% decline. Loss estimates for 2018 have narrowed to 72 cents per share from 83 cents over the last 60 days.
Denny's Corporation (DENN - Free Report) is one of the largest restaurant companies. Shares of the company, carrying a Zacks Rank #3, have gained more than 29% in the past six months, comparing favorably with the industry’s 2% growth. The Zacks Consensus Estimate for earnings has moved 14% up for 2018 and 12.9% for 2019 over the past 30 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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New Analyst Coverage Puts Spotlight on These 4 Stocks
As analysts are the key information intermediaries in capital markets, initiation of coverage by them offers critical information on a stock which is of great value to investors.
Coverage initiation by analyst(s) on a stock portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts’ interest. In other words, they believe that the company coming under coverage has value that can’t be ignored.
Obviously, stocks are not randomly chosen to cover. New coverage 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 ratings on continuously covered stocks.
It is worth mentioning here that the average change in broker recommendation is always preferred over a single recommendation change.
New Analyst Coverage & Impact on Price Movement
The price movement of a stock is the function of the recommendations on it from new analysts. Typically, stocks see an upward price movement on new analyst coverage compared to what was 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.
Meanwhile, investors start paying more attention to the stock (that has very few or no existing coverage) on which an analyst provides a new recommendation. 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 four of the five stocks that passed the screen:
Camtek Ltd. (CAMT - Free Report) designs, develops, manufactures, and markets automatic optical inspection systems and related products. The stock sports a Zack Rank #1 (Strong Buy) and has gained more than 19% in the past six months, outperforming the industry’s 9.5% rally. Earnings estimates have moved 11.4% north for 2018 and 8.8% for 2019 in the last 30 days, depicting the stock’s potential to scale higher. Full-year 2018 and 2019 earnings for the company are expected to grow 81.5% and 25.5%, respectively.
Progenics Pharmaceuticals, Inc. develops medicines and other technologies to treat cancer in the United States and internationally. The stock carries a Zacks Rank #3 (Hold) and has advanced 19.9% in the last six months, faring much better than its industry’s 6.8% decline. Loss estimates for 2018 have narrowed to 72 cents per share from 83 cents over the last 60 days.
Denny's Corporation (DENN - Free Report) is one of the largest restaurant companies. Shares of the company, carrying a Zacks Rank #3, have gained more than 29% in the past six months, comparing favorably with the industry’s 2% growth. The Zacks Consensus Estimate for earnings has moved 14% up for 2018 and 12.9% for 2019 over the past 30 days.
Dropbox Inc. (DBX - Free Report) provides a collaboration platform worldwide. This Zacks Rank #3 stock has seen earnings estimates move up 26.7% for 2018 and 30.4% for 2019 over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
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 »