Stocks were mixed in morning trading Tuesday after starting August on an understated trading note that saw the S&P 500, the Dow, and the Nasdaq all slip by between -0.14% and -0.28% on Monday. The relatively subdued start to the week came after the benchmark index climbed 9% in July for its best monthly performance since November 2020. Meanwhile, the Nasdaq posted its strongest showing since April 2020.

The big month, of course, followed the worst first half since 1970. Nonetheless, Wall Street showcased a willingness to buy beaten-down stocks and picked up the pace following a string of solid earnings reports from the likes of Apple and other tech giants.

The market reacted positively to the Fed’s latest rate hike and took the declining second quarter GDP data in stride. There is a growing sense on Wall Street that inflation might have finally started to peak and that the economy is cooling as consumers start to pull back on spending. Jay Powell and the Fed are committed to their inflation fight, but they might not have to keep raising rates at such a large clip in the back half of 2022.

Investors are now betting on an economic slowdown and the possibility that the Fed won’t have to go too much further, with the 10-year U.S. Treasury yield tumbling from decade-long highs of 3.5% in mid-June to 2.70% on Tuesday.  

Tons of uncertainty remains and Wall Street might not be able to maintain its recent strength until there is a sustained stretch of actual data that shows prices coming down. Plus, investors will likely want to see companies prove their resilience in the third quarter, giving higher interest rates the chance to do their intended job.

That said, there are certainly pockets of the market that have done well in 2022, and many stocks appear poised to thrive in the face of economic unknowns. Today we utilized our new analyst coverage screen to help find stocks that are gaining more attention from Wall Street analysts that could be potential winners for August and beyond.

New Analyst Coverage

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.

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 two of the 12 stocks that came through the screen today…

Ardmore Shipping Corporation (ASC Quick QuoteASC - Free Report) - (from 2 analysts four weeks ago to 3)

Ardmore Shipping owns and operates a fleet of modern, fuel-efficient mid-size tankers. Ardmore’s fleet transports petroleum products and chemicals worldwide to oil majors, national oil companies, oil and chemical traders, and chemical companies. Ardmore provides shipping services to customers through voyage charters, time charters, and commercial pools. ASC has topped our quarterly EPS estimates in the trailing three quarters, including its second quarter beat on July 27.

The firm provided fantastic guidance, with its FY22 consensus EPS estimate now up 200% in the last 60 days and its FY23 projection 240% higher. ASC positivity comes on the back of what the firm calls “a multi-faceted energy crisis likely to persist for some time,” as well as “improving demand/supply fundamentals, most notably the ongoing recovery of oil demand.”

Ardmore lands a Zacks Rank #1 (Strong Buy) right now, with ASC shares up 155% in the past 12 months and 160% in 2022. And some investors might appreciate that it trades for under $10 per share.  

Franklin Electric Co. (FELE Quick QuoteFELE - Free Report) - (from 2 analysts four weeks ago to 4)

Franklin Electric is one of the largest manufacturers of submersible electric motors on the planet. Franklin offers pumps, motors, drives, and controls for use in a wide variety of residential, commercial, agricultural, industrial, and municipal installations, for both clean and grey water applications. FELE shares have outclimbed their Zacks Industrial Products peers over the past 10 years, up 220% vs. 70%, which is also good enough to top the S&P 500.

Franklin stock has surged since the middle of July, and it topped our Q2 earnings estimate on July 26. The company also provided upbeat guidance in the face of economic slowdown fears, with its bottom-line positivity good enough to help FELE land it a Zacks Rank #1 (Strong Buy) at the moment.

Despite its solid performance, FELE trades right near its own decade-long median at 21.7X forward earnings and 30% below its own highs. Zacks estimates call for double-digit top and bottom-line growth this year. And Franklin pays a dividend.

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.

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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.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.