Coverage initiation on a stock by an analyst is not a random act. It takes thorough evaluation and substantial investor focus on the stock 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 new analysts. Positive recommendations — Buy and Strong Buy — lead to a significant 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 taking notice. 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 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 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 five of the 10 stocks that passed the screen:
Ethan Allen Interiors Inc. ETH: Headquartered in Danbury, CT, this is a leading interior design company, and manufacturer as well as retailer of quality home furnishings. The stock currently carries a Zacks Rank #1 (Strong Buy) and has gained 35.8% year to date compared with the industry’s 43.4% rally. Nonetheless, earnings estimates for 2021 have moved up 7.1% over the past 30 days. Earnings are expected to grow 336.5% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Flushing Financial Corporation FFIC: Based in Uniondale, NY, it operates as the bank holding company for Flushing Bank. This Zacks Rank #2 (Buy) stock has surged 35.5% year to date, outperforming the industry’s 31.6% rally. Earnings estimates for 2021 have moved up 15.9% over the past 30 days. The company’s earnings are expected to grow 41.8% for 2021.
Assurant, Inc. AIZ: Based in New York, NY, this company is a global provider of risk management solutions in housing and lifestyle markets. This Zacks Rank #2 stock has surged 15.5% year to date, underperforming the industry’s 20.2% growth. Earnings estimates have moved up 1.7% over the past 30 days for 2021. The company’s earnings are expected to grow 12.9% for 2021.
The New York Times Company NYT: Headquartered in New York, NY, this company provides news and information to readers as well as viewers across various platforms worldwide. This Zacks Rank #2 stock has outperformed the industry year to date. Earnings estimates have moved up 16% over the past 30 days for 2021. The company’s earnings are expected to grow 13.8% for 2021.
Enable Midstream Partners, LP ENBL: Enable Midstream operates and develops midstream energy infrastructure assets in the United States. This Zacks Rank #2 stock has surged 59.5% year to date, outperforming the industry’s 34.7% rally. The company’s earnings are expected to grow 85.7% for the current quarter.
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