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Find Strong Stocks to Buy in March with New Analyst Coverage
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Stocks dipped to end the final day of February, capping off a rough and volatile first two months of 2022. The selling ramped up through early afternoon trading on Tuesday, with the S&P 500 down 1.6% and the Nasdaq around 1.4% lower.
The selling comes as Wall Street continues to focus on the quickly-evolving geopolitical situation. U.S. stocks have slipped to start the week, but things looked far worse last Thursday morning before investors stepped in to buy stocks when they felt things had gotten a bit overdone.
The downturn to start March comes as the U.S. and other nations ratchet up their economic pressure on Russia with heavier sanctions to curb its continued invasion of Ukraine. The impact on the Russian economy is already being felt and the hope is the potential economic pain and turmoil will end the fighting. There have been talks between leaders of the two countries, but the Russian shelling of Ukrainian cities continues.
Attempting to predict what’s next is nearly impossible, which might keep many investors on the sidelines. That said, the S&P 500 is already down over 10% from its peaks and the tech-heavy Nasdaq is trading 16% below its records. And both indexes have moved roughly sideways since the end of January.
At home, Wall Street is focused on 40-year high inflation and the Fed’s response, with its first rate hike since the pandemic began expected later this month. Despite rate hikes, interest rates are projected to remain historically low and the demand for U.S. debt remains high, with the 10-year U.S. Treasury yield back at roughly 1.7%, after it climbed above 2% for the first time since 2019 last month.
Low yields, coupled with 7% inflation continue to make equities attractive even with all of the real concerns. Investors can also look to the impressive outlook for S&P 500 revenue, margins, and earnings in 2022 and 2023 as reasons for longer-term market optimism.
Investors who decide to stay on the hunt for stocks might want to utilize our new analyst coverage screen to help find potential winners for March 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 stocks that came through the screen today…
Iron Mountain (IRM - Free Report) - (from 2 analysts four weeks ago to 3)
Iron Mountain is a leader in innovative storage, datacenter infrastructure, asset lifecycle management, and information management services. The REIT boasts that it helps store and protect billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts. Iron Mountain has over 225K customers around the world and its stock has outpaced its industry over the last five years.
Iron Mountain topped our Q4 FFO (or earnings) and revenue estimates on February 24 and analysts have upped their bottom-line outlooks for FY22 and FY23 since then to help it land a Zacks Rank #2 (Buy) right now. Iron Mountain’s dividend yield also comes in at 5% to easily surpass its industry’s 3.2% average and the 30-year U.S. Treasury.
Quidel Corporation (QDEL - Free Report) - (from 2 analysts four weeks ago to 3)
Quidel Corporation is a top manufacturer of diagnostic healthcare solutions. QDEL’s portfolio includes rapid diagnostic testing solutions, cellular-based virology assays, and molecular diagnostic systems to help quickly diagnose infectious diseases, as well as cardiovascular and metabolic conditions, and more.
Quidel announced on December 23 that it signed a definitive agreement to acquire one of the world’s largest pure-play in vitro diagnostics firms, Ortho Clinical Diagnostics Holdings plc. The deal is expected to close in the first half of 2022. Quidel topped Zacks Q4 EPS and sales estimates on February 17. Quidel, which has benefited from Covid-19 testing solutions, has seen its consensus earnings estimates soar since its release to help it land its Zacks #1 (Strong Buy).
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.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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.
Image: Bigstock
Find Strong Stocks to Buy in March with New Analyst Coverage
Stocks dipped to end the final day of February, capping off a rough and volatile first two months of 2022. The selling ramped up through early afternoon trading on Tuesday, with the S&P 500 down 1.6% and the Nasdaq around 1.4% lower.
The selling comes as Wall Street continues to focus on the quickly-evolving geopolitical situation. U.S. stocks have slipped to start the week, but things looked far worse last Thursday morning before investors stepped in to buy stocks when they felt things had gotten a bit overdone.
The downturn to start March comes as the U.S. and other nations ratchet up their economic pressure on Russia with heavier sanctions to curb its continued invasion of Ukraine. The impact on the Russian economy is already being felt and the hope is the potential economic pain and turmoil will end the fighting. There have been talks between leaders of the two countries, but the Russian shelling of Ukrainian cities continues.
Attempting to predict what’s next is nearly impossible, which might keep many investors on the sidelines. That said, the S&P 500 is already down over 10% from its peaks and the tech-heavy Nasdaq is trading 16% below its records. And both indexes have moved roughly sideways since the end of January.
At home, Wall Street is focused on 40-year high inflation and the Fed’s response, with its first rate hike since the pandemic began expected later this month. Despite rate hikes, interest rates are projected to remain historically low and the demand for U.S. debt remains high, with the 10-year U.S. Treasury yield back at roughly 1.7%, after it climbed above 2% for the first time since 2019 last month.
Low yields, coupled with 7% inflation continue to make equities attractive even with all of the real concerns. Investors can also look to the impressive outlook for S&P 500 revenue, margins, and earnings in 2022 and 2023 as reasons for longer-term market optimism.
Investors who decide to stay on the hunt for stocks might want to utilize our new analyst coverage screen to help find potential winners for March 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 stocks that came through the screen today…
Iron Mountain (IRM - Free Report) - (from 2 analysts four weeks ago to 3)
Iron Mountain is a leader in innovative storage, datacenter infrastructure, asset lifecycle management, and information management services. The REIT boasts that it helps store and protect billions of valued assets, including critical business information, highly sensitive data, and cultural and historical artifacts. Iron Mountain has over 225K customers around the world and its stock has outpaced its industry over the last five years.
Iron Mountain topped our Q4 FFO (or earnings) and revenue estimates on February 24 and analysts have upped their bottom-line outlooks for FY22 and FY23 since then to help it land a Zacks Rank #2 (Buy) right now. Iron Mountain’s dividend yield also comes in at 5% to easily surpass its industry’s 3.2% average and the 30-year U.S. Treasury.
Quidel Corporation (QDEL - Free Report) - (from 2 analysts four weeks ago to 3)
Quidel Corporation is a top manufacturer of diagnostic healthcare solutions. QDEL’s portfolio includes rapid diagnostic testing solutions, cellular-based virology assays, and molecular diagnostic systems to help quickly diagnose infectious diseases, as well as cardiovascular and metabolic conditions, and more.
Quidel announced on December 23 that it signed a definitive agreement to acquire one of the world’s largest pure-play in vitro diagnostics firms, Ortho Clinical Diagnostics Holdings plc. The deal is expected to close in the first half of 2022. Quidel topped Zacks Q4 EPS and sales estimates on February 17. Quidel, which has benefited from Covid-19 testing solutions, has seen its consensus earnings estimates soar since its release to help it land its Zacks #1 (Strong Buy).
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.
Want more articles from this author? Scroll up to the top of this article and click the FOLLOW AUTHOR button to get an email each time a new article is published.
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.