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5 Stocks to Keep an Eye On As Analysts Initiate Coverage
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Investors have immense faith in the research work of analysts as they fear that misinterpretations while researching on their own might trigger inefficiencies. Here, analysts play a vital intermediary role with their extensive access to relevant data.
Mercer International Inc. (MERC - Free Report) , Blucora, Inc. , Universal Technical Institute, Inc. (UTI - Free Report) , Hilton Grand Vacations Inc. (HGV - Free Report) and Kura Sushi USA, Inc. (KRUS - Free Report) are some stocks that have seen new analyst coverage lately. These, therefore, are expected to attract investor attention.
Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume 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 has 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 investors’ focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t love to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly-added stocks are more favorable than their ratings on continuously covered stocks.
It is needless to say, the average change in broker recommendation is preferred over a single recommendation change.
How Does Analyst Coverage Influence Stock Price?
The price movement of a stock is generally a function of the recommendations on it from new analysts. Stocks typically see an upward price movement with a new analyst coverage compared to what they witness with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significantly more 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 very few 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.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage over the last 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 also 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 out of the 12 stocks that passed the screen:
Mercer International: Headquartered in Vancouver, Canada, this company owns and operates a diverse pulp and paper business in the southern German states of Saxony and Thuringia.
MERC currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 17.6% year to date (YTD) against the industry’s 18.5% drop. Earnings estimates for 2022 have increased to $3.79 per share from $3.33 over the past 30 days. The estimated figure calls for a 46.9% increase from the year-ago period.
Blucora: This Dallas, TX-based company provides technology-enabled financial solutions.
The BCOR stock has gained 6.4% YTD compared with the industry’s 44.6% decline. Earnings estimates for 2022 have increased to $1.82 per share from $1.75 over the past seven days. The estimated figure calls for a 3.4% increase from the year-ago period. BCOR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Universal Technical Institute: This Phoenix, AZ-based postsecondary education company provides transportation and technical training programs in the United States.
UTI currently carries a Zacks Rank #3 (Hold). The stock has lost 3% YTD compared with the industry’s 10% drop. Earnings estimates for fiscal 2022 have increased 68.6% over the past 60 days to 59 cents per share. The estimated figure for fiscal 2022 calls for a 118.5% increase from the year-ago period.
Hilton Grand Vacations: Based in Orlando, FL, this company is engaged in hospitality business and develops, markets, sells and manages vacation ownership resorts primarily under the Hilton Grand Vacations brand.
HGV currently carries a Zacks Rank #3. The stock has lost 26.9% YTD compared with the industry’s 19.5% drop. The Zacks Consensus Estimate for 2022 earnings calls for a 62% increase from the year-ago period.
Kura Sushi USA: Headquartered in Irvine, CA, this company is a unit of Kura Sushi, Inc. and operates technology-enabled Japanese restaurants in the United States.
KRUS currently carries a Zacks Rank #3. The stock has lost 4.4% YTD, outperforming the industry’s 18% decline. Loss estimates for 2022 have narrowed to 24 cents from 43 cents over the past month. The estimated figure calls for an 88.9% improvement from the year-ago period.
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 to Keep an Eye On As Analysts Initiate Coverage
Investors have immense faith in the research work of analysts as they fear that misinterpretations while researching on their own might trigger inefficiencies. Here, analysts play a vital intermediary role with their extensive access to relevant data.
Mercer International Inc. (MERC - Free Report) , Blucora, Inc. , Universal Technical Institute, Inc. (UTI - Free Report) , Hilton Grand Vacations Inc. (HGV - Free Report) and Kura Sushi USA, Inc. (KRUS - Free Report) are some stocks that have seen new analyst coverage lately. These, therefore, are expected to attract investor attention.
Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume 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 has 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 investors’ focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t love to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly-added stocks are more favorable than their ratings on continuously covered stocks.
It is needless to say, the average change in broker recommendation is preferred over a single recommendation change.
How Does Analyst Coverage Influence Stock Price?
The price movement of a stock is generally a function of the recommendations on it from new analysts. Stocks typically see an upward price movement with a new analyst coverage compared to what they witness with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significantly more 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 very few 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.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage over the last 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 also 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 out of the 12 stocks that passed the screen:
Mercer International: Headquartered in Vancouver, Canada, this company owns and operates a diverse pulp and paper business in the southern German states of Saxony and Thuringia.
MERC currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 17.6% year to date (YTD) against the industry’s 18.5% drop. Earnings estimates for 2022 have increased to $3.79 per share from $3.33 over the past 30 days. The estimated figure calls for a 46.9% increase from the year-ago period.
Blucora: This Dallas, TX-based company provides technology-enabled financial solutions.
The BCOR stock has gained 6.4% YTD compared with the industry’s 44.6% decline. Earnings estimates for 2022 have increased to $1.82 per share from $1.75 over the past seven days. The estimated figure calls for a 3.4% increase from the year-ago period. BCOR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Universal Technical Institute: This Phoenix, AZ-based postsecondary education company provides transportation and technical training programs in the United States.
UTI currently carries a Zacks Rank #3 (Hold). The stock has lost 3% YTD compared with the industry’s 10% drop. Earnings estimates for fiscal 2022 have increased 68.6% over the past 60 days to 59 cents per share. The estimated figure for fiscal 2022 calls for a 118.5% increase from the year-ago period.
Hilton Grand Vacations: Based in Orlando, FL, this company is engaged in hospitality business and develops, markets, sells and manages vacation ownership resorts primarily under the Hilton Grand Vacations brand.
HGV currently carries a Zacks Rank #3. The stock has lost 26.9% YTD compared with the industry’s 19.5% drop. The Zacks Consensus Estimate for 2022 earnings calls for a 62% increase from the year-ago period.
Kura Sushi USA: Headquartered in Irvine, CA, this company is a unit of Kura Sushi, Inc. and operates technology-enabled Japanese restaurants in the United States.
KRUS currently carries a Zacks Rank #3. The stock has lost 4.4% YTD, outperforming the industry’s 18% decline. Loss estimates for 2022 have narrowed to 24 cents from 43 cents over the past month. The estimated figure calls for an 88.9% improvement from the year-ago period.
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