Quantcast

Harness the Power of New Analyst Coverage


Shutterstock photo

Broker recommendations play their part no matter how investors feel about them. And we seemingly all take a look no matter what.

Individual investors, large institutional portfolio managers, and everyone in between are likely pleased to see one of their stocks get an upgraded rating or a new analyst cover the company.

With that said, we are trying to harness the power of new analyst coverage.

Right off the bat, investor interest can generate more analyst coverage. This helps explain why analysts jump on young, much-hyped and talked about tech companies. Then, as new coverage is initiated, the company and the stock become more visible, which in turn often leads to more demand potential and therefore the possibility of higher prices.  

Plus, analysts almost always initiate coverage with a positive recommendation. And the logic follows because why spend all the time and write a research report on a company not widely tracked only to say it's not good?

When it comes to companies with little to no analyst coverage, 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 search for companies with analyst coverage that has increased over the last 4 weeks. We just look at the number of analyst recommendations today and compare it to the number of analyst recommendations 4 weeks ago.

The rule of thumb here is that an increase in coverage leans bullish and a decrease signals bearish behavior. It is also worth pointing out that, in general, the change in the average broker recommendation is a better indicator than the actual recommendation itself.

On top of that, it is typically more bullish if the increase went from none to one or if the coverage was minimal to begin with. (As the number of analysts climbs the addition of new coverage isn't earth-shattering.) In the end, increased coverage is still better than decreased coverage, unless the coverage is heading in the wrong direction.  

Now let's try this screen.

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', we mean 'better than' four weeks ago.)

Prices greater than or equal to 5

(We're applying all of the above parameters to stocks above $5 a share since many money managers won't even look at stocks under $5)

Average Daily Volume greater than or equal to 100,000 shares

(If there's not enough volume, even individual investors won't want it).

Here are 5 stocks from this week's screen:

Sandstorm Gold Ltd (SAND) - (from 2 analysts four weeks ago to 3)

Titan Machinery Inc. (TITN) - (from 2 analysts four weeks ago to 3)

Unisys Corporation (UIS) - (from 2 analysts four weeks ago to 3)

James River Group Holdings, Ltd. (JRVR) - (from 2 analysts four weeks ago to 3)

Pampa Energia S.A. (PAM) - (from 2 analysts four weeks ago to 3)

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.

Click here to sign up for a free trial to the Research Wizard today .

Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.

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/ .

Today's Stocks from Zacks' Best Screens

Now would you like to see the best from our best? From 2017 through 2018, while the market gained +15.8%, five of our stock-picking strategies returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 - 2018, while the S&P averaged +4.8% per year, our top screens averaged up to +56.2% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Unisys Corporation (UIS): Free Stock Analysis Report

Titan Machinery Inc. (TITN): Free Stock Analysis Report

Sandstorm Gold Ltd (SAND): Free Stock Analysis Report

Pampa Energia S.A. (PAM): Free Stock Analysis Report

James River Group Holdings, Ltd. (JRVR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: UIS , TITN , SAND , PAM , JRVR




More from Zacks.com

Subscribe






Zacks.com
Contributor:

Zacks.com

Equity Research










Research Brokers before you trade

Want to trade FX?