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5 Stocks for Higher Returns as Analysts Initiate Coverage
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New analyst coverage provides extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. Lack of information creates chances of misinterpretation of stocks (over- or under-valued).
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.
Obviously, stocks are not randomly chosen to cover. 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 ratings on stocks under continuous coverage. Needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Price Movement
The price movement of a stock generally depends on the recommendations on it from new analysts. Usually, stocks see an upward price movement on new analyst coverage compared to what was witnessed with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significant 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 limited 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.
Below, we have selected five stocks that have seen increased analyst coverage over the past 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 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 five of the 15 stocks that passed the screen:
Tronox Holdings plc (TROX - Free Report) : Based in Stamford, CT, this company is a vertically integrated mining and inorganic chemical business. The stock currently carries a Zacks Rank #1 (Strong Buy) and has gained 56.7% year to date compared with the industry’s 14.7% rally. Earnings estimates for 2021 have moved up 6.7% over the past 30 days. Earnings are expected to grow 242.9% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group, Inc. (HCI - Free Report) : Headquartered in Tampa, FL, this is a holding company that conducts business activities through its subsidiaries. This Zacks Rank #2 (Buy) stock has surged 75.4% year to date, outperforming the industry’s 17.8% rally. Earnings estimates for 2021 have moved up 6.7% over the past 60 days. The company’s earnings are expected to grow 18.8% for 2022.
EMCORE Corporation (EMKR - Free Report) : Based in Alhambra, CA, this company provides advanced mixed-signal optics products. This Zacks Rank #2 stock has surged 87.7% year to date, outperforming the industry’s 28.8% rally. Earnings estimates for 2021 have moved up 28.6% over the past 60 days. The company’s earnings are expected to grow 584.6% for 2021.
One Stop Systems, Inc. (OSS - Free Report) : Based in Escondido, CA, this company designs, manufactures, and markets high-performance computing modules and systems for edge deployments. The stock currently carries a Zacks Rank #3 (Hold) and has gained 54.8% year to date against the industry’s 7.3% decline. Earnings estimates for 2021 have moved up 25% over the past 30 days. Earnings are expected to grow 87.5% for the current year.
TransAlta Corporation (TAC - Free Report) : Based in Calgary, Canada, this company operates, and develops a diverse fleet of electrical power generation assets in Canada, the United States as well as Australia. The stock currently carries a Zacks Rank #3 and has gained 29.8% year to date compared with the industry’s 4.5% growth. Earnings estimates for 2021 have moved up 33.3% over the past 30 days. Earnings are expected to grow 142.1% for 2021.
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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5 Stocks for Higher Returns as Analysts Initiate Coverage
New analyst coverage provides extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. Lack of information creates chances of misinterpretation of stocks (over- or under-valued).
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.
Obviously, stocks are not randomly chosen to cover. 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 ratings on stocks under continuous coverage. Needless to say, the average change in broker recommendation is preferred over a single recommendation change.
Impact on Price Movement
The price movement of a stock generally depends on the recommendations on it from new analysts. Usually, stocks see an upward price movement on new analyst coverage compared to what was witnessed with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significant 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 limited 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.
Below, we have selected five stocks that have seen increased analyst coverage over the past 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 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 five of the 15 stocks that passed the screen:
Tronox Holdings plc (TROX - Free Report) : Based in Stamford, CT, this company is a vertically integrated mining and inorganic chemical business. The stock currently carries a Zacks Rank #1 (Strong Buy) and has gained 56.7% year to date compared with the industry’s 14.7% rally. Earnings estimates for 2021 have moved up 6.7% over the past 30 days. Earnings are expected to grow 242.9% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group, Inc. (HCI - Free Report) : Headquartered in Tampa, FL, this is a holding company that conducts business activities through its subsidiaries. This Zacks Rank #2 (Buy) stock has surged 75.4% year to date, outperforming the industry’s 17.8% rally. Earnings estimates for 2021 have moved up 6.7% over the past 60 days. The company’s earnings are expected to grow 18.8% for 2022.
EMCORE Corporation (EMKR - Free Report) : Based in Alhambra, CA, this company provides advanced mixed-signal optics products. This Zacks Rank #2 stock has surged 87.7% year to date, outperforming the industry’s 28.8% rally. Earnings estimates for 2021 have moved up 28.6% over the past 60 days. The company’s earnings are expected to grow 584.6% for 2021.
One Stop Systems, Inc. (OSS - Free Report) : Based in Escondido, CA, this company designs, manufactures, and markets high-performance computing modules and systems for edge deployments. The stock currently carries a Zacks Rank #3 (Hold) and has gained 54.8% year to date against the industry’s 7.3% decline. Earnings estimates for 2021 have moved up 25% over the past 30 days. Earnings are expected to grow 87.5% for the current year.
TransAlta Corporation (TAC - Free Report) : Based in Calgary, Canada, this company operates, and develops a diverse fleet of electrical power generation assets in Canada, the United States as well as Australia. The stock currently carries a Zacks Rank #3 and has gained 29.8% year to date compared with the industry’s 4.5% growth. Earnings estimates for 2021 have moved up 33.3% over the past 30 days. Earnings are expected to grow 142.1% for 2021.
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