Buy These 5 Top Stocks on New Analyst Coverage
Increased analyst coverage over the past few weeks might lead to solid price appreciation for stocks like Costamare (CMRE), BrightSphere (BSIG), Main Street Capital (MAIN) and UGI Corp (UGI).
New analyst coverage unearths extensive data on stocks for investors. Analysts are privy to vital information, which is crucial for investment decisions. They are much relied on as the lack of information creates chances of misinterpretation (over- or under-valued).
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 the continuation of existing analyst coverage. Of course, the price movement depends on the recommendations from new analysts. Positive recommendations — Buy and Strong Buy — lead to a significant positive incremental price reaction than Strong Sell, Sell or Hold recommendations.
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.
It is to be noted that 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 in mind, it’s a good strategy to focus on the number of analyst recommendations that have increased over the past few weeks.
Below, we have selected four stocks that have seen increased analyst coverage over the past 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 also consider other relevant parameters to make it 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 17 stocks that passed the screen:
Costamare Inc. CMRE: This Monaco-based company operates as a containership owner chartering its vessels to liner companies. This Zacks Rank #1 (Strong Buy) stock has gained 131% over the past year, faring better than the industry’s 100% rally. Earnings estimates for the current year have moved up 11.5% over the past 30 days. Its earnings are expected to grow 147.1% in 2021.
BrightSphere Investment Group Inc. BSIG: Based in Boston, MA, this publicly-owned asset management holding company currently carries a Zacks Rank #2 (Buy). The stock has gained 109.7% over the past year compared with the industry’s 37.6% growth. Earnings estimates for the current year have moved up 6% over the past seven days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Main Street Capital Corporation MAIN: This Houston, TX-based private equity firm provides equity capital to lower middle-market companies. The stock has gained 52.4% over the past year compared with the industry’s 51.6% rally. Earnings estimates for the current year have moved up 2.5% over the past 30 days. Its earnings are expected to grow 19.1% in 2021.
UGI Corporation UGI: Headquartered in King of Prussia, PA, this company distributes, stores, transports, and markets energy products as well as related services. This Zacks Rank #2 stock has gained 34.5% over the past year compared with the industry’s 26.1% growth. Its earnings are expected to grow 7.9% this year.
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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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