For Immediate Release
Chicago, IL – May 17, 2018 - Stocks in this week’s article include: Boise Cascade Company (BCC - Free Report) , Commercial Vehicle Group Inc. (CVGI - Free Report) , Century Communities, Inc. (CCS - Free Report) , Echo Global Logistics Inc. (ECHO - Free Report) and Bunge Ltd. (BG - Free Report) .
Screen of the Week of Zacks Investment Research:
5 Stocks Shining on Recent Broker Rating Upgrades
The picture that has emerged from the Q1 earnings season is an extremely bright one. With only a handful of companies left to report, the season is expected to end on a high, displaying substantially higher earnings growth than witnessed in the recent quarters. Apart from significant year-over-year growth, a high proportion of companies have reported better-than-expected earnings per share.
Generally, an earnings beat leads to stock price appreciation. Given this favorable background, investors would like to add outperformers to their portfolios for healthy returns.
However, the task is easier said than done, especially for an individual investor. With a plethora of stocks flooding the market at a particular point of time, it is nearly impossible for an investor to go through the financials and other relevant details for each and every company before arriving at a decision (Buy, Sell or Hold). The time constraint that we all face these days makes the task even more difficult for individual investors.
This is where proper guidance is required. To prevent their hard-earned money from going down the drain, investors often than not pay heed to the advice of brokers while designing their respective portfolios.
Why Paying Heed to Broker Advice is a Good Practice
The opinion of brokers acts as a valuable guide for investors while deciding their course of action (buy, sell or hold) on a particular stock. Broker ratings are backed by sound logic. They have deeper insight into the happenings of a particular company as they directly communicate with management.
They undertake extensive research on the company’s publicly available financial statements apart from attending conference calls. In a bid to deepen their understanding of a particular stock, they sometimes converse with customers to find out their likes/dislikes about the products and services offered by the company.
In view of their expertise, it is prudent for investors to pay heed to broker advice while formulating their investment strategy for generating handsome returns. Of the three types of brokers/analysts (Sell-side, Buy-side and independent) present in the investment world, Sell-side analysts are most common. Various brokerage firms employ them to provide unbiased opinion to investors after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.
Earnings Estimate Revisions – A Proper Guide
As mentioned above, brokers closely follow the stocks in their coverage. Therefore, they revise earnings estimates only after carefully examining the pros and cons of an event for a particular company. In fact, a rating upgrade or downgrade by brokers has the potential to influence the price of the stock.
Naturally, when investors see brokers revising their estimates or recommendation on a stock, they often assume that there is something in the stock that has attracted analyst attention. In fact, a rating upgrade generally leads to stock price appreciation. Similarly, the price of a stock may plummet following a rating downgrade.
Estimates can move north for a number of reasons – favorable earnings performance, a bullish guidance, product launch or any favorable macro scenario.
Framing a Successful Strategy
The above write-up clearly suggests that by following broker actions, one can arrive at a winning portfolio of stocks. Keeping this in mind, we have designed a screen to shortlist stocks based on improving analyst recommendation and upward revisions to earnings estimates over the last four weeks.
Also, since the price/sales ratio is a strong complementary valuation metric in the presence of analyst information, it has been included. The price/sales ratio takes care of the company’s top line, making the strategy foolproof.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/303714/5-stocks-shining-on-recent-broker-rating-upgrades
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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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Contact: Jim Giaquinto
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