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For Immediate Release
Screen of the Week of Zacks Investment Research:
4 Stocks in Limelight on New Analyst Coverage
As analysts are one of the most important information intermediaries in capital markets, initiation of coverage by them creates value for companies.
It is to be borne in mind that the lack of consistency in information creates inefficiencies that might result in misinterpretation of stocks (over- or under-valued). Thus, coverage initiation by analysts offers critical information on a stock which is of great value to investors.
Coverage initiation on a stock by analyst(s) usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the radar definitely has some value which can be tapped into.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.
However, we have noticed that the average change in broker recommendation is preferred over a single recommendation change.
Analyst Coverage & Price Movement
Interestingly, the price movement is generally a function of the recommendations from new analysts. Stocks typically see an upward price movement with a new analyst coverage compared to what they witness 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 issues a new recommendation on a company that has limited 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.
So, it's a good strategy to bet on stocks that have seen increased analyst coverage over the last few weeks.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/306701/4-stocks-in-limelight-on-new-analyst-coverage
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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.
About Screen of the Week
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Contact: Jim Giaquinto
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