We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Analysts provide extensive information on companies that they cover through formal reports, projections, recommendation revisions as well as via research notes. The importance of new analyst coverage is evident from the extensive data it unearths for investors. Analysts are privy to vital information and are crucial to investment decisions.
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.
Do analysts create value for companies by initiating coverage? Of course they do because they play an important intermediary role with their extensive access to relevant data. Many investors have immense faith in analysts’ research as they fear that lack of information might trigger inefficiencies.
Obviously, stocks are not randomly chosen to cover. A 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 more preferable than 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 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 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 consider other relevant parameters to make the strategy 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 five of the 11 stocks that passed the screen:
LAKELAND BANCORP INC. (LBAI - Free Report) , a bank holding company engaged in general banking business, has climbed 69.7% in the last one year, outperforming the Zacks classified Banks-Northeast industry’s 30.5% gain. The Zacks Rank #2 (Buy) stock saw positive earnings estimate revision of 3 cents for this year over the past 30 days, with an expected growth rate of 6.4%.
Daqo New Energy Corp. (DQ - Free Report) is engaged in the manufacture and sale of high-quality polysilicon to photovoltaic product manufacturers. The stock climbed 26.8% in the last one month, outperforming the Zacks classified Chemicals-Specialty industry’s 1.2% gain. The stock saw positive earnings estimate revision of 29.7% for this year and 4.5% for the next over the past 30 days. This Zacks Rank #3 (Hold) stock has a VGM Score of ‘A’.
China Lodging Group, Limited (HTHT - Free Report) , an economy hotel chain operator in China, sports a Zacks Rank #1 (Strong Buy). Estimates moved north by 11 cents over the last 30 days to $2.14 per share for the current year, with an expected growth rate of 30.5%. The stock has rallied 44.6% so far this year, outperforming the Hotels & Motels industry’s 0.5% gain. You can see the complete list of today’s Zacks #1 Rank stocks here.
Electro Scientific Industries, Inc. provides electronics manufacturers with equipment necessary to produce key components used in wireless telecommunications, computers, automotive electronics, and many other electronic products. With a Zacks Rank #3, the stock has climbed 40.5% so far this year, faring better than the Zacks Lasers-Systems/Components industry’s 26.6% rise. The company is expected to register 83.5% EPS growth in the current year and 252.6% in the next.
Adesto Technologies Corp. provides application-specific non-volatile memory products. The Zacks Rank #3 stock has skyrocketed 173% so far this year, outperforming the Zacks Internet Software/Services industry‘s 24.8% increase. The company is expected to witness 57.3% EPS growth in the current year and 37.1% in the next.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
5 Stocks to Buy on New Analyst Coverage
Analysts provide extensive information on companies that they cover through formal reports, projections, recommendation revisions as well as via research notes. The importance of new analyst coverage is evident from the extensive data it unearths for investors. Analysts are privy to vital information and are crucial to investment decisions.
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.
Do analysts create value for companies by initiating coverage? Of course they do because they play an important intermediary role with their extensive access to relevant data. Many investors have immense faith in analysts’ research as they fear that lack of information might trigger inefficiencies.
Obviously, stocks are not randomly chosen to cover. A 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 more preferable than 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 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 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 consider other relevant parameters to make the strategy 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 five of the 11 stocks that passed the screen:
LAKELAND BANCORP INC. (LBAI - Free Report) , a bank holding company engaged in general banking business, has climbed 69.7% in the last one year, outperforming the Zacks classified Banks-Northeast industry’s 30.5% gain. The Zacks Rank #2 (Buy) stock saw positive earnings estimate revision of 3 cents for this year over the past 30 days, with an expected growth rate of 6.4%.
Daqo New Energy Corp. (DQ - Free Report) is engaged in the manufacture and sale of high-quality polysilicon to photovoltaic product manufacturers. The stock climbed 26.8% in the last one month, outperforming the Zacks classified Chemicals-Specialty industry’s 1.2% gain. The stock saw positive earnings estimate revision of 29.7% for this year and 4.5% for the next over the past 30 days. This Zacks Rank #3 (Hold) stock has a VGM Score of ‘A’.
China Lodging Group, Limited (HTHT - Free Report) , an economy hotel chain operator in China, sports a Zacks Rank #1 (Strong Buy). Estimates moved north by 11 cents over the last 30 days to $2.14 per share for the current year, with an expected growth rate of 30.5%. The stock has rallied 44.6% so far this year, outperforming the Hotels & Motels industry’s 0.5% gain. You can see the complete list of today’s Zacks #1 Rank stocks here.
Electro Scientific Industries, Inc. provides electronics manufacturers with equipment necessary to produce key components used in wireless telecommunications, computers, automotive electronics, and many other electronic products. With a Zacks Rank #3, the stock has climbed 40.5% so far this year, faring better than the Zacks Lasers-Systems/Components industry’s 26.6% rise. The company is expected to register 83.5% EPS growth in the current year and 252.6% in the next.
Adesto Technologies Corp. provides application-specific non-volatile memory products. The Zacks Rank #3 stock has skyrocketed 173% so far this year, outperforming the Zacks Internet Software/Services industry‘s 24.8% increase. The company is expected to witness 57.3% EPS growth in the current year and 37.1% in the next.
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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »