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New Analysts Initiate Coverage: 3 Top-Ranked Stocks to Buy
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As Wall Street is reeling under the evolving geopolitical situation, Fed’s rate hikes and high inflation this year, investors are increasingly becoming thoughtful about choosing stocks for their portfolio.
As stock markets have been experiencing volatility, investors may look for stocks that recently received new analyst coverage. The logic behind this is that analysts don’t add a stock to their coverage randomly. New coverage on a stock is usually the result of a huge investor focus on it or its promising prospects.
Terns Pharmaceuticals, Inc. (TERN - Free Report) , Napco Security Technologies, Inc. (NSSC - Free Report) and AVEO Pharmaceuticals, Inc. are a few stocks that have witnessed new analyst coverage lately. These, therefore, are expected to attract investor attention.
There’s no denying that the lack of consistency in information creates inefficiencies that might result in misinterpretation of stocks. Initiation of coverage by analysts offers critical information on a stock which is of great value to investors.
Coverage initiation on a stock by analyst(s) usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the radar definitely has some value, which can be tapped into.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.
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 positive price reaction than a Hold recommendation. 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.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage over the last few weeks.
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 the volume isn’t enough, it will not attract individual investors).
Here are three out of the 13 stocks that passed the screen:
Terns Pharmaceuticals: This is a clinical-stage biopharmaceutical company based in Foster City, CA. Terns Pharmaceuticals engages in the development of small-molecule single-agent and combination therapy candidates for the treatment of non-alcoholic steatohepatitis and obesity.
TERN stock has gained 16% over the past six months against the industry’s 12.2% decline. Loss estimates for 2022 have narrowed to $2.10 per share from $2.18 over the past seven days. The estimated figure calls for a 5% improvement from the year-ago period.
Napco Security Technologies: Based in Amityville, NY, Napco Security engages in the development, manufacturing and selling of electronic security products in the United States and abroad.
NSSC stock has gained 44% over the past six months against the industry’s 16.7% decline. Earnings estimates for fiscal 2023 have increased to 71 cents per share from 52 cents over the past 30 days. The estimated figure calls for a 65.1% increase from the year-ago period.
AVEO Pharmaceuticals: This Boston, MA-based biopharmaceutical company develops and commercializes medicines for cancer patients.
AVEO stock has gained 42.9% over the past six months, outperforming the industry’s 12.1% decline. Loss estimates for 2022 have narrowed to 94 cents per share from $1.06 over the past 60 days. The estimated figure calls for a 42.3% 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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New Analysts Initiate Coverage: 3 Top-Ranked Stocks to Buy
As Wall Street is reeling under the evolving geopolitical situation, Fed’s rate hikes and high inflation this year, investors are increasingly becoming thoughtful about choosing stocks for their portfolio.
As stock markets have been experiencing volatility, investors may look for stocks that recently received new analyst coverage. The logic behind this is that analysts don’t add a stock to their coverage randomly. New coverage on a stock is usually the result of a huge investor focus on it or its promising prospects.
Terns Pharmaceuticals, Inc. (TERN - Free Report) , Napco Security Technologies, Inc. (NSSC - Free Report) and AVEO Pharmaceuticals, Inc. are a few stocks that have witnessed new analyst coverage lately. These, therefore, are expected to attract investor attention.
There’s no denying that the lack of consistency in information creates inefficiencies that might result in misinterpretation of stocks. Initiation of coverage by analysts offers critical information on a stock which is of great value to investors.
Coverage initiation on a stock by analyst(s) usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the radar definitely has some value, which can be tapped into.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.
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 positive price reaction than a Hold recommendation. 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.
So, it’s a good strategy to bet on stocks that have seen increased analyst coverage over the last few weeks.
Below, we have selected three stocks that have seen increased analyst coverage over the last few weeks and carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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 the volume isn’t enough, it will not attract individual investors).
Here are three out of the 13 stocks that passed the screen:
Terns Pharmaceuticals: This is a clinical-stage biopharmaceutical company based in Foster City, CA. Terns Pharmaceuticals engages in the development of small-molecule single-agent and combination therapy candidates for the treatment of non-alcoholic steatohepatitis and obesity.
TERN stock has gained 16% over the past six months against the industry’s 12.2% decline. Loss estimates for 2022 have narrowed to $2.10 per share from $2.18 over the past seven days. The estimated figure calls for a 5% improvement from the year-ago period.
Napco Security Technologies: Based in Amityville, NY, Napco Security engages in the development, manufacturing and selling of electronic security products in the United States and abroad.
NSSC stock has gained 44% over the past six months against the industry’s 16.7% decline. Earnings estimates for fiscal 2023 have increased to 71 cents per share from 52 cents over the past 30 days. The estimated figure calls for a 65.1% increase from the year-ago period.
AVEO Pharmaceuticals: This Boston, MA-based biopharmaceutical company develops and commercializes medicines for cancer patients.
AVEO stock has gained 42.9% over the past six months, outperforming the industry’s 12.1% decline. Loss estimates for 2022 have narrowed to 94 cents per share from $1.06 over the past 60 days. The estimated figure calls for a 42.3% 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