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Finding Great Under-the-Radar Stocks to Buy in May
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The market fell through morning trading on Tuesday as Wall Street braces for the Fed’s two-day FOMC meeting.
The Fed is projected to keep rates unchanged on May 1, meaning the market will likely move on Powell’s comments.
If the Fed boss leans hawkish the market could sell off, and vice versa. Wall Street then turns its attention to April jobs data on Friday morning. Sandwiched between these two potential market-moving events are a slew of corporate earnings, including from Apple and Amazon.
The unknowns around the corner should not deter investors since market timing is a dangerous game. The last several years and the first four months of 2024 are wonderful examples of why staying constantly exposed to stocks is a winning long-term formula.
Investors who want to buy stocks in May and beyond might consider searching for stocks gaining more attention from Wall Street.
The concept is simple: analysts are more inclined to start covering a stock they view as having substantial upside potential vs. picking up coverage only to say ‘stay away.’
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 is one of the three stocks that came through the screen today…
Old Republic International Corporation ((ORI - Free Report) ) - (from 2 analysts four weeks ago to 3)
Old Republic International Corporation is a Chicago-based insurance company. Old Republic International’s subsidiaries actively market, underwrite, and provide risk management services for a variety of coverages, concentrating heavily in the general and title insurance fields. Old Republic's general insurance segment is one of the 50 largest in the U.S.
Image Source: Zacks Investment Research
Old Republic International topped our Q1 2024 earnings estimate on April 25 and its overall earnings outlook has climbed over the last few years. Zacks estimates call for Old Republic International’s revenue to climb 5% in 2024 and 2025 to help boost its adjusted earnings by 3% and 6%, respectively.
ORI shares have climbed 80% in the past 10 years vs. its industry’s 2% decline and its sector’s 64%. Old Republic International stock has jumped 37% in the trailing two years to outpace its industry and the Zacks Finance sector’s 15%. Old Republic International stock is trading between its 21-day and 50-day moving averages.
Image Source: Zacks Investment Research
Even though ORI has outperformed the Zacks Finance sector recently and in the long run, it trades at a 25% discount at 10.8X forward 12-month earnings. Old Republic International’s 3.6% dividend yield also blows away its industry’s 2.1% average.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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
Finding Great Under-the-Radar Stocks to Buy in May
The market fell through morning trading on Tuesday as Wall Street braces for the Fed’s two-day FOMC meeting.
The Fed is projected to keep rates unchanged on May 1, meaning the market will likely move on Powell’s comments.
If the Fed boss leans hawkish the market could sell off, and vice versa. Wall Street then turns its attention to April jobs data on Friday morning. Sandwiched between these two potential market-moving events are a slew of corporate earnings, including from Apple and Amazon.
The unknowns around the corner should not deter investors since market timing is a dangerous game. The last several years and the first four months of 2024 are wonderful examples of why staying constantly exposed to stocks is a winning long-term formula.
Investors who want to buy stocks in May and beyond might consider searching for stocks gaining more attention from Wall Street.
The concept is simple: analysts are more inclined to start covering a stock they view as having substantial upside potential vs. picking up coverage only to say ‘stay away.’
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 is one of the three stocks that came through the screen today…
Old Republic International Corporation ((ORI - Free Report) ) - (from 2 analysts four weeks ago to 3)
Old Republic International Corporation is a Chicago-based insurance company. Old Republic International’s subsidiaries actively market, underwrite, and provide risk management services for a variety of coverages, concentrating heavily in the general and title insurance fields. Old Republic's general insurance segment is one of the 50 largest in the U.S.
Image Source: Zacks Investment Research
Old Republic International topped our Q1 2024 earnings estimate on April 25 and its overall earnings outlook has climbed over the last few years. Zacks estimates call for Old Republic International’s revenue to climb 5% in 2024 and 2025 to help boost its adjusted earnings by 3% and 6%, respectively.
ORI shares have climbed 80% in the past 10 years vs. its industry’s 2% decline and its sector’s 64%. Old Republic International stock has jumped 37% in the trailing two years to outpace its industry and the Zacks Finance sector’s 15%. Old Republic International stock is trading between its 21-day and 50-day moving averages.
Image Source: Zacks Investment Research
Even though ORI has outperformed the Zacks Finance sector recently and in the long run, it trades at a 25% discount at 10.8X forward 12-month earnings. Old Republic International’s 3.6% dividend yield also blows away its industry’s 2.1% average.
Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.
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: www.zacks.com/performance_disclosure