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Analysts Initiate Coverage: Top 5 Stocks to Buy for Higher Returns
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New analyst coverage unearths extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. Lack of information creates chances of misinterpretation of stocks (over- or under-valued).
New analyst coverage helps to identify stocks that have significant growth potential. Skyline Champion Corporation (SKY - Free Report) , Beazer Homes USA, Inc. (BZH - Free Report) , AdvanSix Inc. (ASIX - Free Report) , First BanCorp. (FBP - Free Report) and BrightSphere Investment Group Inc. (BSIG - Free Report) are some such picks.
Coverage initiation on a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume that there is something special in a stock to attract analysts to cover it. In other words, they believe that the company coming under the microscope definitely holds some value.
Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t like to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly added stocks are more favorable than their ratings on continuously covered stocks.
Needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Stock Price
The price movement of a stock is generally a function of the recommendations on it 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 more positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
Now, if an analyst gives a new recommendation on a company that has very few 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 past 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 also consider other relevant parameters to make it 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 the five of the 17 stocks that passed the screen:
Skyline Champion: Based in Troy, MI, this company operates as a factory-built housing company in North America.
Skyline currently sports a Zacks Rank #1 (Strong Buy) and has gained 156.8% year to date (YTD), faring better than the industry’s 46% rally. Earnings estimates for the current year have moved up 23.9% over the past 30 days. Its earnings are expected to grow 117% this year.
Beazer Homes: This Atlanta-based homebuilder continues to gain from strong operational execution and persistent strength in the housing market.
Beazer Homes currently sports a Zacks Rank #1. The stock has gained 48.4% YTD, faring better than the industry’s 27.9% rally. Earnings are expected to grow 23.7% in fiscal 2022.
AdvanSix: Based in Parsippany, NJ, this company makes and sells polymer resins in the United States and internationally.
AdvanSix currently sports a Zacks Rank #1. The stock has gained 147.4% YTD, faring better than the industry’s 9.4% rally. Earnings are expected to grow 197% in 2021.
First BanCorp.: Headquartered in Santurce, Puerto Rico, this company operates as the bank holding company for FirstBank Puerto Rico.
First BanCorp currently carries a Zacks Rank #2 (Buy) and has gained 55.5% YTD, faring better than the industry’s 42.6% rally. Earnings estimates for the current year have moved up 5.4% over the past 30 days. Its earnings are expected to grow 211.4% in 2021.
BrightSphere Investment Group: Based in Boston, MA, this is a publicly-owned asset management holding company.
BrightSphere currently carries a Zacks Rank #2. The stock has gained 57.7% YTD compared with the industry’s 21.7% growth. Earnings estimates for the current year have moved up 2.2% 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.
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.
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Analysts Initiate Coverage: Top 5 Stocks to Buy for Higher Returns
New analyst coverage unearths extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. Lack of information creates chances of misinterpretation of stocks (over- or under-valued).
New analyst coverage helps to identify stocks that have significant growth potential. Skyline Champion Corporation (SKY - Free Report) , Beazer Homes USA, Inc. (BZH - Free Report) , AdvanSix Inc. (ASIX - Free Report) , First BanCorp. (FBP - Free Report) and BrightSphere Investment Group Inc. (BSIG - Free Report) are some such picks.
Coverage initiation on a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume that there is something special in a stock to attract analysts to cover it. In other words, they believe that the company coming under the microscope definitely holds some value.
Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t like to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly added stocks are more favorable than their ratings on continuously covered stocks.
Needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Stock Price
The price movement of a stock is generally a function of the recommendations on it 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 more positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
Now, if an analyst gives a new recommendation on a company that has very few 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 past 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 also consider other relevant parameters to make it 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 the five of the 17 stocks that passed the screen:
Skyline Champion: Based in Troy, MI, this company operates as a factory-built housing company in North America.
Skyline currently sports a Zacks Rank #1 (Strong Buy) and has gained 156.8% year to date (YTD), faring better than the industry’s 46% rally. Earnings estimates for the current year have moved up 23.9% over the past 30 days. Its earnings are expected to grow 117% this year.
Beazer Homes: This Atlanta-based homebuilder continues to gain from strong operational execution and persistent strength in the housing market.
Beazer Homes currently sports a Zacks Rank #1. The stock has gained 48.4% YTD, faring better than the industry’s 27.9% rally. Earnings are expected to grow 23.7% in fiscal 2022.
AdvanSix: Based in Parsippany, NJ, this company makes and sells polymer resins in the United States and internationally.
AdvanSix currently sports a Zacks Rank #1. The stock has gained 147.4% YTD, faring better than the industry’s 9.4% rally. Earnings are expected to grow 197% in 2021.
First BanCorp.: Headquartered in Santurce, Puerto Rico, this company operates as the bank holding company for FirstBank Puerto Rico.
First BanCorp currently carries a Zacks Rank #2 (Buy) and has gained 55.5% YTD, faring better than the industry’s 42.6% rally. Earnings estimates for the current year have moved up 5.4% over the past 30 days. Its earnings are expected to grow 211.4% in 2021.
BrightSphere Investment Group: Based in Boston, MA, this is a publicly-owned asset management holding company.
BrightSphere currently carries a Zacks Rank #2. The stock has gained 57.7% YTD compared with the industry’s 21.7% growth. Earnings estimates for the current year have moved up 2.2% 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