Stocks rebounded in a big way on Tuesday as Wall Street appears to breathe a sigh of relief that the Silicon Valley Bank collapse won’t lead to a wider contagion among regional banks and the financial sector. Investors also appeared to cheer on February’s CPI data which showed signs of cooling inflation.

The CPI came in at 6% to match Wall Street estimates and mark a slowdown from January’s 6.4%. In fact, February marked the smallest YoY increase since September of 2021. Meanwhile, so-called core inflation, which strips out food and energy costs, rose 5.5% to match estimates and slip just below January’s 5.6%. On a monthly basis, prices popped 0.4% vs. 0.5% in January.

February’s data showcased that inflation remains stubbornly high and well off the Fed’s 2% average target range. But the recent banking turmoil might have forced Jay Powell and the Fed to take a more cautious approach at its March 21-22 FOMC meeting. The Fed boss last week spooked Wall Street by hinting at a 0.50% hike. Now traders have taken that option off the table.

There is a growing school of thought that the Fed might have finally “broken” something after raising rates at a historically fast clip. Wall Street currently places a 33% chance that the U.S. central bank keeps the Fed Funds rate unchanged at its current 4.50%-4.75% range. The CME FedWatch Tool didn’t even have a non-hike as a possibility listed until a few days ago. Meanwhile, the market puts a 67% probability on a smaller 0.25% hike.

If regulators and Wall Street are able to contain any further fallout from the Silicon Valley Bank collapse and the Fed is forced to ease up on its tightening efforts, stocks could easily bounce back. With this in mind, we utilized our new analyst coverage screen to help investors find stocks that are gaining more attention from Wall Street that could be potential winners in 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 eight stocks that came through the screen today…

Archrock ((AROC Quick QuoteAROC - Free Report) ) - (from 2 analysts four weeks ago to 3)

Archrock is an energy infrastructure firm focused on midstream natural gas compression. The Houston, Texas-based firm offers natural gas compression services to customers in the oil and natural gas industry throughout the U.S. AROC is also a top supplier of aftermarket services to customers that already own compression equipment. Archrock’s revenue popped 9% in fiscal 2022 and its adjusted earnings soared 55%.

The company is benefitting from a larger effort to expand U.S. natural gas production amid the energy shakeup caused by the rebound in prices and the Russian invasion of Ukraine. Zacks estimates call for its revenue to climb another 15% in FY23 and 8% higher in FY24. Better yet, Archrock’s adjusted earnings are projected to soar 111% this year and another 29% in 2024.

Archrock boosted its guidance in a big way when it reported its results on February 21 to help it land a Zacks Rank #2 (Buy) right now. AROC executives said that “the demand for compression exceeds available equipment,” and noted it was confident enough to resume “dividend growth.” AROC’s dividend currently yields 5.9% and its Oil and Gas - Field Services segment ranks in the top 21% of over 250 Zacks industries. AROC shares have soared 40% in the last six months and they still trade 36% below their average Zacks price target at around $10.40 a share.

Employers Holdings ((EIG Quick QuoteEIG - Free Report) ) - (from 1 analyst four weeks ago to 3)

Employers Holdings and its subsidiaries are specialty providers of workers' compensation insurance and services focused on select, small businesses engaged in low-to-medium hazard industries. The firm has crushed our adjusted earnings estimates in the trailing three quarters, including a 65% beat in Q4.

Employers Holdings crucially raised its outlook for 2023 to help it grab a Zacks Rank #1 (Strong Buy) at the moment. Zacks estimates call for EIG’s revenue to surge 21% in 2023 and then climb nearly 10% higher in 2024. The projected top-line growth is expected to help boost its adjusted earnings by 6% and 10%, respectively.

EIG’s Insurance - Accident and Health industry is in the top 7% of over 250 Zacks industries, and its dividend yields 2.6% right now. Employers Holdings shares are up 85% in the past decade and 4% in the past year to top its highly-ranked industry. This includes a nice 14% run higher in the trailing six months.

EIG trades 26% below its average Zacks price target. Employers Holdings also trades near its own five-year lows at 12.9X forward 12-month earnings, which marks a 30% discount to its median.

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.