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As analysts are the most important information intermediaries in capital markets, initiation of coverage by them creates value for investors, avoiding any misinterpretation of stocks (over- or under-valued).
Coverage initiation on a stock by analyst(s) leads to increased investor enthusiasm. This is because investors tend to believe that the stock holds some value to have attracted analyst attention.
Of course, stocks are not randomly picked to cover. A new coverage on a stock is usually the result of a promising future envisioned by 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?
It has been noted that stocks typically see an incremental price movement with a new analyst initiating coverage compared to what they witness with a rating upgrade under an existing coverage. Of course, the price movement is a function of recommendations from new analysts. Positive recommendations – Buy and Strong Buy – generally lead to a significant positive price reaction than Hold recommendations. In this regard, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
However, one should also look for the average change in broker recommendation rather than a single recommendation change.
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.
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 the strategy 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 13 stocks that passed the screen:
Build-A-Bear Workshop, Inc. (NYSE: BBW – Free Report) is the only national company providing a make-your-own stuffed animal interactive retail-entertainment experience. The stock has returned more than 7% last month, compared with its industry’s 4.6%. The stock flaunts a Zacks Rank #2 (Buy) and a VGM Score of B. The stock saw positive earnings estimate revision of 17.8% for this year and 17.5% for 2018 over the past 60 days. It has an expected growth rate of 28.1% for 2017 and 26.7% for 2018.
Kura Oncology, Inc. (Nasdaq: KURA – Free Report), a biopharmaceutical company, has climbed 89.4% in the last month, while the industry gained 9.9%. This Zacks Rank #2 stock has seen positive earnings estimate revisions for this year and the next over the past 30 days. The company has a solid average positive earnings surprise of 8.63% for the trailing four quarters.
Norsk Hydro ASA (OTCMKTS: NHYDY – Free Report), an aluminum company, has climbed 58.3% year to date, while the industry gained 15%. The stock carries a Zacks Rank #2 and has seen earnings estimates move up 4.4% for this year over the past 60 days Positive earnings estimate revisions for 2017 along with an expected earnings growth rate of 111.4% for 2017 indicates the stock’s potential for price appreciation.
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN – Free Report) collects, processes and recycles metals by operating one of the largest metals recycling businesses in the United States. The stock has outperformed the industry, gaining 7.8% so far this year. The company has a solid earnings growth rate of 118.8% for the current year and 33.1% for the next year. The stock, with a Zacks Rank #3 (Hold), has seen earnings estimates move up 5.6% for this year and 25.6% for the next over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SYNNEX Corporation (NYSE: SNX – Free Report) is a global IT supply chain services company. The stock carries a Zacks Rank #2 and has a solid VGM Score of A. The company has an average positive surprise of 15.09% for the trailing four quarters, with four back-to-back beats. The company has a solid earnings growth rate of 14.7% for the current quarter and 19.8% for the year. The stock has gained 3% last month, outperforming its industry’s gain of 1.6%.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include Build-A-Bear Workshop, Kura Oncology, Norsk Hydro, Schnitzer Steel Industries and SYNNEX
For Immediate Release
Chicago, IL – September 21, 2017 - Stocks in this week’s article include Build-A-Bear Workshop, Inc.(NYSE: (BBW - Free Report) – Free Report), Kura Oncology, Inc. (Nasdaq: (KURA - Free Report) – Free Report), Norsk Hydro ASA (OTCMKTS: (NHYDY - Free Report) – Free Report), Schnitzer Steel Industries, Inc. (Nasdaq: – Free Report) and SYNNEX Corporation (NYSE: (SNX - Free Report) – Free Report).
Screen of the Week of Zacks Investment Research:
5 Stocks in the Limelight on New Analyst Coverage
As analysts are the most important information intermediaries in capital markets, initiation of coverage by them creates value for investors, avoiding any misinterpretation of stocks (over- or under-valued).
Coverage initiation on a stock by analyst(s) leads to increased investor enthusiasm. This is because investors tend to believe that the stock holds some value to have attracted analyst attention.
Of course, stocks are not randomly picked to cover. A new coverage on a stock is usually the result of a promising future envisioned by 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?
It has been noted that stocks typically see an incremental price movement with a new analyst initiating coverage compared to what they witness with a rating upgrade under an existing coverage. Of course, the price movement is a function of recommendations from new analysts. Positive recommendations – Buy and Strong Buy – generally lead to a significant positive price reaction than Hold recommendations. In this regard, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.
However, one should also look for the average change in broker recommendation rather than a single recommendation change.
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.
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 the strategy 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 13 stocks that passed the screen:
Build-A-Bear Workshop, Inc. (NYSE: BBW – Free Report) is the only national company providing a make-your-own stuffed animal interactive retail-entertainment experience. The stock has returned more than 7% last month, compared with its industry’s 4.6%. The stock flaunts a Zacks Rank #2 (Buy) and a VGM Score of B. The stock saw positive earnings estimate revision of 17.8% for this year and 17.5% for 2018 over the past 60 days. It has an expected growth rate of 28.1% for 2017 and 26.7% for 2018.
Kura Oncology, Inc. (Nasdaq: KURA – Free Report), a biopharmaceutical company, has climbed 89.4% in the last month, while the industry gained 9.9%. This Zacks Rank #2 stock has seen positive earnings estimate revisions for this year and the next over the past 30 days. The company has a solid average positive earnings surprise of 8.63% for the trailing four quarters.
Norsk Hydro ASA (OTCMKTS: NHYDY – Free Report), an aluminum company, has climbed 58.3% year to date, while the industry gained 15%. The stock carries a Zacks Rank #2 and has seen earnings estimates move up 4.4% for this year over the past 60 days Positive earnings estimate revisions for 2017 along with an expected earnings growth rate of 111.4% for 2017 indicates the stock’s potential for price appreciation.
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN – Free Report) collects, processes and recycles metals by operating one of the largest metals recycling businesses in the United States. The stock has outperformed the industry, gaining 7.8% so far this year. The company has a solid earnings growth rate of 118.8% for the current year and 33.1% for the next year. The stock, with a Zacks Rank #3 (Hold), has seen earnings estimates move up 5.6% for this year and 25.6% for the next over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SYNNEX Corporation (NYSE: SNX – Free Report) is a global IT supply chain services company. The stock carries a Zacks Rank #2 and has a solid VGM Score of A. The company has an average positive surprise of 15.09% for the trailing four quarters, with four back-to-back beats. The company has a solid earnings growth rate of 14.7% for the current quarter and 19.8% for the year. The stock has gained 3% last month, outperforming its industry’s gain of 1.6%.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.
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Visit: https://www.zacks.com/performance
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.