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.
Below, we have selected four 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 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 13 stocks that passed the screen:
Guess', Inc. GES: Based in Los Angeles, CA, Guess' designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It carries a Zacks Rank #3 (Hold) and has gained 23.5% year to date compared with its industry’s 5.7% growth. Earnings estimates have moved up 7.4% over the past 30 days for 2021. Earnings for the company are expected to grow 2,371.4% for 2021.
Babcock & Wilcox Enterprises, Inc. BW: Headquartered in Akron, OH, this company provides energy and environmental technologies and services for the power and industrial markets worldwide. This Zacks Rank #3 company has gained 105.4% year to date compared with the industry’s 8.3% growth. Earnings for the company are expected to grow 112% for 2021.
Wabash National Corporation WNC: Based in headquartered in Lafayette, IN, Wabash is one of the leading manufacturers of semi trailers in North America. The stock carries a Zacks Rank #3 and has gained 7.2% year to date against its industry’s 11.8% decline. Earnings for the company are expected to grow 426.7% for 2021. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PLx Pharma Inc. PLXP: Based in Sparta, NJ, this is a specialty pharmaceutical company with a Zacks Rank #3. This company’s shares have gained 89.3% year to date against its industry’s 11.2% decline. Loss estimates for this company have narrowed down to 62 cents per share from 84 cents over the past 30 days for 2021. Bottom line for the company is expected to improve 64.4% for 2021.
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.
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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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Guess, Inc. (GES) : Free Stock Analysis Report
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Dipexium Pharmaceuticals, Inc. (PLXP) : Free Stock Analysis Report
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