Broker recommendations — love them or hate them, we all look at them eventually. Whether you’re a small retail investor, a large institutional portfolio manager or somewhere in between, you probably like it when a stock gets an upgraded rating or see an analyst jumping in with new coverage.
Investor interest plays a role in generating analyst coverage, which explains the recent increase in analyst coverage for Facebook (FB) — a company that’s only been public for just over one year — in comparison to a company like General Electric (GE), which has been public for more than 40 years.
Analysts almost always initiate coverage with a positive recommendation, which makes the company more visible and leads to potential for increased demand and prices. So, looking for companies with recently-increased analyst coverage is a smart way to gauge what to expect. Simply look at a stock screener measuring the number of analyst recommendations now in comparison to the number of analyst recommendations four weeks ago. Assuming the coverage is positive, an increase is bullish whereas a decrease is bearish.
Track Analyst Coverage
Use Zacks’ stock screener to track coverage:
Check the ‘Number of Broker Ratings’ field in the stock screener to see which stocks have new coverage and the ‘Average Broker Rating’ field to gauge how that first field compares.
Additionally, I would apply the apply the above parameters in the stock screener with prices greater than or equal to $5 (because cheaper stocks don’t typically get broker coverage) and average daily volume greater than or equal to 100,000 shares (because retail investor won’t want a stock without enough volume).
5 Stocks With Increased Coverage
2U (TWOU) is up from three analysts four weeks ago to five today.
Marriott Vacations (VAC) coverage is up from four analysts four weeks ago to five now.
First American Financial (FAF) is up from three analysts four weeks ago to four now.
Spectrum Brands (SPB) increased from three analysts four weeks ago to five.
Gentherm (THRM) increased coverage from six analysts four weeks ago to seven 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: http://www.zacks.com/performance.
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