Broker recommendations -- love them or hate them, they do have
their place. And we all look at them eventually.
Whether you're a small individual investor or a large institutional
portfolio manager (or somewhere in between), who doesn't like it
when a stock gets an upgraded rating or sees a new analyst jumping
in with coverage? We all do. (Although I should note that, in
general, the change in the average broker recommendation is a
better indicator than the actual recommendation itself.)
Anyway, today I want to talk about companies that receive new
One of the things that generates analyst coverage is investor
interest. How else can you explain the increased analyst coverage
(a company that's only been public for less than 1 1/2 yrs.) in
comparison to a company like GE (public for more than 40 yrs.)?
And as new coverage is initiated, it becomes more visible, which in
turn means potentially more demand (read higher prices).
This is often the case because analysts almost always initiate
coverage with a positive recommendation. (Why write a research
report on a company not widely followed only to say it stinks?)
And when it comes to companies with little to no analyst coverage,
that 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 look for companies with
analyst coverage that has increased over the last 4 weeks.
Simply look at the number of analyst recommendations now in
comparison to the number of analyst recommendations 4 weeks ago. An
increase in coverage is bullish whereas a decrease in coverage is
It's typically more bullish if the increase went from none to one
or if the coverage was minimal to begin with. (Going from 25 to 26
isn't going to have the same impact because that 26th analyst isn't
discovering something 'new'.) But increased coverage is better than
decreased coverage -- assuming the coverage is positive of course.
Here's a screen to try:
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', I mean 'better than' four weeks ago.)
- And I'm applying all of the above parameters to stocks with
Prices greater than or equal to 5
(most money managers won't even look at a stock under $5) and
Average Daily Volume greater than or equal to 100,000
(if there's not enough volume, even individual investors won't
Here are 5 stocks from this week's screen:
The Hanover Insurance Group
Many screeners won't let you search for the number of analysts
covering a stock, let alone comparing the amount of coverage they
had weeks or even months ago. But you can with the Research Wizard.
And you can backtest it all. Find out how to pick the right stocks
right now by taking a free trial to the Research Wizard stock
picking and backtesting program.
Sign up for a free trial to the Research Wizard
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:
ABM INDUSTRIES (ABM): Free Stock Analysis
GRIFOLS SA-ADR (GRFS): Free Stock Analysis
GUIDEWIRE SFTWR (GWRE): Free Stock Analysis
PARAGON SHIPPNG (PRGN): Free Stock Analysis
HANOVER INSURAN (THG): Free Stock Analysis
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