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4 Safe Stocks That Brokers Recommend

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There is safety in numbers.

From an investment point of view, this is illustrated in the theory that you should get into stocks that are on their way up. These are the stocks that get more people interested. And as more people are into them, there is more demand for them. This creates upward momentum in prices.

The concept can be extended to stocks that brokers recommend. Because when brokers recommend a stock, many people are likely to buy it. This is likely to create demand for the stock and result in resistance to downside pressure.

The more obvious reason also works -- i.e., brokers are likely to recommend stocks that have a better chance of doing well at any given time. And this opinion is derived from a careful study of the factors driving a company’s operations and its stock’s price performance. So it is likely to be correct.

It’s also worth pointing out that our best guess of what is likely to happen over the next year or so is based on estimates provided by these analysts/brokers. Therefore, it makes sense to put broker recommendations front and center of whatever investment strategy we happen to be pursuing.

Taking this as the primary basis for selecting stocks, we can also consider the companies’ recent results, the estimate revisions trend and the long-term growth potential. To be on the safe side, it’s best to stick with large-cap stocks.

Let’s take a look at a few examples:

CrowdStrike Holdings, Inc. (CRWD - Free Report)

The average broker rating on CrowdStrike shares is 1.05, which translates to a Strong Buy recommendation. What’s more, all 20 brokers covering the stock have a Buy or Strong Buy rating on it.

A leading provider of next-generation endpoint protection, threat intelligence and cyberattack response services, Crowdstrike reported strong results in the last quarter, beating the Zacks Consensus Estimate by 34.8%. The four-quarter average surprise is 44.3%. In the last 30 days, both 2022 and 2023 estimates have been raised a respective 9.8% and 6.1%.

Analysts currently expect Crowdstrike to grow 2022 revenue and earnings by a respective 52.0% and 83.6% and 2023 revenue and earnings by a respective 37.1% and 42.4%. For the long term, they’re expecting earnings growth of 38.4%.

Carlisle Companies Inc. (CSL - Free Report)

Carlisle Companies has an average broker rating of 1.00, which is a Strong Buy. Brokers have unanimously driven the ranking on these shares. After its first-quarter earnings surprise of +67.7% (four quarter average +23.0%), they have taken their estimates up. Accordingly, over a span of 60 days, we see a 22.8% increase in the 2022 estimate and a 20.7% increase in the 2023 estimate.

Overall, revenues are expected to increase 31.1% this year and 6.2% in the next while earnings increase 86.9% this year and 10.6% in the next. This provider of a wide range of roofing and waterproofing products, engineered products and finishing equipment is expected to grow 17.0% in the long term.

Cheniere Energy, Inc. (LNG - Free Report)

Cheniere Energy has an average broker rating of 1.14, also a Strong Buy. All of the 11 analysts covering the stock are in agreement that this provider of liquefied natural gas (LNG - Free Report) has a strong growth outlook. In the last quarter it reversed a trend of negative surprises to beat the Zacks Consensus Estimate by 120.1%.

Analysts quickly raised their estimates: by 39.5% for 2022 and 31.8% for 2023. They now expect its revenue and earnings to grow 81.3% and 267.5% in 2022. While current estimates point to a decline in 2023, the numbers are well above 2021 levels, and rising. For the long term, analysts expect Cheniere to grow 54.6%.

Monolithic Power Systems (MPWR - Free Report)

Monolithic Power has an average broker rating of 1.20. This too translates to a Strong Buy recommendation. The provider of high-performance analog and mixed-signal integrated circuits has analysts quite excited. As a result, all of them recommend the shares.

The company’s recent performance has served to strengthen their confidence. Monolithic Power has topped expectations by 8.4% in the last quarter and also in each of the last four quarters at an average rate of 8.0%. As may be expected, the last 60 days have seen analysts raising their 2022 estimates by 20.6%.

The 2023 estimates are also up an average 22.6%. Analysts currently expect revenue growth of 43.3% and 19.4% in 2022 and 2023, respectively. Their earnings growth expectations for the two years are 55.8% and 17.4%, respectively. For the long term, they currently expect earnings growth of 25.0%.

One-Month Price Performance

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