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New Analysts Initiate Coverage: 3 Top Stocks to Buy
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Coverage initiation on a stock by analyst(s) helps in interpreting information pertaining to capital markets, thereby creating value for investors. Lack of information creates inefficiencies that might trigger misinterpretation of stocks (over- or under-valued).
H&E Equipment Services, Inc. (HEES - Free Report) , Target Hospitality Corp. (TH - Free Report) and Pilgrim's Pride Corporation (PPC - Free Report) are some stocks that have seen new analyst coverage lately and are therefore expected to attract investors' attention.
In fact, coverage initiation 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 microscope definitely has some value. 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.
It is to be noted that the average change in broker recommendation is preferred over a single recommendation change.
How Does Analyst Coverage Influence 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 last 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 three out of the four stocks that passed the screen:
H&E Equipment Services: Based in Baton Rouge, Louisiana, H&E Equipment is an integrated equipment services company.
HEES currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 33.3% over the past year versus the industry’s 4% decline. Earnings estimates for 2022 have increased 9.6% over the past 30 days to $2.63 per share. The estimated figure calls for a 34.9% increase from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Hospitality: It operates as a specialty rental and hospitality services company in North America, based in Woodlands, TX.
TH currently carries a Zacks Rank #2 (Buy). The stock has gained 143.9% over the past year versus the industry’s 12.9% decline. Earnings estimates for 2022 have increased to 9 cents per share from 2 cents over the past 30 days. The estimated figure indicates 280% growth from the year-ago period.
Pilgrim's Pride: Based in Greeley, CO, this company is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products.
PPC currently carries a Zacks Rank #2. The stock has lost 1.8% over the past year compared with the industry’s 2% decline. Earnings estimates for 2022 have increased 3% over the past 30 days, depicting analysts’ optimism for the company’s prospects. The estimated figure calls for a 19.7% increase from the year-ago period.
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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New Analysts Initiate Coverage: 3 Top Stocks to Buy
Coverage initiation on a stock by analyst(s) helps in interpreting information pertaining to capital markets, thereby creating value for investors. Lack of information creates inefficiencies that might trigger misinterpretation of stocks (over- or under-valued).
H&E Equipment Services, Inc. (HEES - Free Report) , Target Hospitality Corp. (TH - Free Report) and Pilgrim's Pride Corporation (PPC - Free Report) are some stocks that have seen new analyst coverage lately and are therefore expected to attract investors' attention.
In fact, coverage initiation 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 microscope definitely has some value.
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.
It is to be noted that the average change in broker recommendation is preferred over a single recommendation change.
How Does Analyst Coverage Influence 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 last 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 three out of the four stocks that passed the screen:
H&E Equipment Services: Based in Baton Rouge, Louisiana, H&E Equipment is an integrated equipment services company.
HEES currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 33.3% over the past year versus the industry’s 4% decline. Earnings estimates for 2022 have increased 9.6% over the past 30 days to $2.63 per share. The estimated figure calls for a 34.9% increase from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Hospitality: It operates as a specialty rental and hospitality services company in North America, based in Woodlands, TX.
TH currently carries a Zacks Rank #2 (Buy). The stock has gained 143.9% over the past year versus the industry’s 12.9% decline. Earnings estimates for 2022 have increased to 9 cents per share from 2 cents over the past 30 days. The estimated figure indicates 280% growth from the year-ago period.
Pilgrim's Pride: Based in Greeley, CO, this company is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products.
PPC currently carries a Zacks Rank #2. The stock has lost 1.8% over the past year compared with the industry’s 2% decline. Earnings estimates for 2022 have increased 3% over the past 30 days, depicting analysts’ optimism for the company’s prospects. The estimated figure calls for a 19.7% increase from the year-ago period.
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