New analyst coverage provides extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. Lack of information creates chances of misinterpretation of stocks (over- or under-valued).
Coverage initiation on a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume that 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 holds 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 investor focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t like to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly-added stocks are more favorable than ratings on stocksunder continuous coverage.Needless to say, the average change in broker recommendation is preferred over a single recommendation change. Impact on Price Movement The price movement of a stock generally depends on the recommendations on it from new analysts. Usually, stocks see an upward price movement on new analyst coverage compared to what was witnessed with a rating upgrade under an existing coverage. Positive recommendations – Buy and Strong Buy – generally lead to a significantly 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 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. Below, we have selected four 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 four of the seven stocks that passed the screen: Independent Bank Corporation ( IBCP Quick Quote IBCP - Free Report) operates as the holding company for Independent Bank that provides various banking services to individuals and businesses in Michigan. This Zacks Rank #2 (Buy) company has gained 0.3% over the past six months, against its industry’s decline of 0.5%. Earnings estimates for 2020 have moved 3% up over the past 30 days, depicting analyst optimism over the stock’s potential. HarborOne Bancorp, Inc. HONE is a financial services holding company. The company carries a Zacks Rank #2 and has gained 3.7% over the past six months, outperforming its industry’s rally of 0.8%. Earnings estimates for 2020 have moved 3% north over the past 30 days. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Horizon Technology Finance Corporation HRZN is a business development company. This Zacks Rank #3 (Hold) company has gained 4.1% over the past six months, outperforming its industry’s rise of 4%. Earnings estimates for 2020 have moved 2.4% up over the past 30 days. Cue Biopharma, Inc. CUE is an immunotherapy company and carries a Zacks Rank #3. The stock has gained 108% over the past six months, outperforming its industry’s rally of 6.2%. Earnings for 2020 are expected to grow 27.3%. 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