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5 Stocks in Focus as Analysts Initiate Coverage

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Analysts don’t add a stock to their coverage randomly. New coverage on a stock is usually the result of huge investor focus on it or its promising prospects.

Interestingly, stocks typically see an incremental upward price movement with new analyst coverage compared to what they witness with continuation of existing analyst coverage. Of course, the price movement depends on the recommendations from the new analysts. Positive recommendations — Buy and Strong Buy — lead to a significant positive incremental price reaction than Strong Sell, Sell or Hold recommendations.

Moreover, if an analyst gives a new recommendation on a company that has limited or no analyst coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.

However, one should preferably look for the average change in broker recommendation rather than a single recommendation change. Then again, an upgrade, an initiation or even increased coverage is equally important.

Keeping this mind, it’s a good strategy to focus on the number of analyst recommendations that have increased 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 eight stocks that passed the screen:

Camtek Ltd. CAMT, a maker of automatic optical inspection and process enhancement systems, currently carries a Zacks Rank #2 (Buy). The company has gained 20.6% over the past year, outperforming its industry’s growth of 10.3%. Earnings estimates for 2020 have moved 9.1% up over the past seven days, depicting analyst optimism over the stock’s potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SP Plus Corporation (SP - Free Report) , a provider of professional parking, ground transportation, facility maintenance, security and event logistics services, currently has a Zacks Rank #2. The company’s shares have outperformed its industry’s over a year. Earnings estimates for 2020 have moved 0.7% up over the past 30 days. Earnings for 2020 are expected to increase 11%.

Granite Point Mortgage Trust Inc. GPMT, a real estate investment trust, has a Zacks Rank #2. Although the company’s shares have underperformed its industry over the past year, the Zacks Consensus Estimate for its next-year earnings has moved up 2% over the past 30 days. The company’s expected earnings growth rate for the next quarter and year is 5.6% and 4.8%, respectively.

Vivint Smart Home, Inc. VVNT, a smart home company, currently carries a Zacks Rank #3 (Hold). The company has gained 90.2% over a year, outperforming its industry’s growth of 0.7%. Earnings for 2020 are expected to rise 84.9%.

Douglas Dynamics, Inc. PLOW, a snowplow maker, currently carries a Zacks Rank #3. The company’s shares have outperformed its industry’s over a year. Earnings for 2020 are expected to increase 9.5%.

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.

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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.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance


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