The initiation of coverage by new analysts can be highly advantageous for investors and has a substantial impact on financial markets. Analysts typically possess in-depth knowledge and expertise in particular industries or sectors. Through their thorough research and analysis, they furnish investors with valuable perspectives on a company's financial well-being, potential for growth, competitive standing and the prevailing industry trends. Such insights can be challenging for individual investors to acquire independently.
Ardmore Shipping Corporation ASC and DHT Holdings, Inc. DHT are two stocks that have witnessed new analyst coverage lately, signaling their value and growth opportunities for investors.
Analysts don't randomly choose which stocks to cover. Their decision is typically driven by significant investor interest or promising prospects associated with a particular stock.
An interesting observation is that when stocks receive new analyst coverage, they often experience gradual upward price movements compared to those already covered by analysts. The magnitude of this price movement is influenced by the recommendations made by the new analysts. Positive recommendations like "Buy" and "Strong Buy" tend to result in more substantial positive price reactions than "Strong Sell," "Sell," or "Hold" recommendations.
When an analyst provides a new recommendation for a company with limited or no prior analyst coverage, investors pay increased attention to the stock. Additionally, portfolio managers may become interested in building positions in such stocks due to the fresh information.
Rather than focusing solely on a single recommendation change, it is advisable to consider the average change in broker recommendations. Upgrades, initiations and increased coverage by multiple analysts carry equal significance in assessing a stock's potential.
To create a prudent investment strategy, it's worthwhile to concentrate on the number of analyst recommendations in recent weeks. This approach can offer valuable insights into the overall sentiment and potential trajectory of a stock, helping investors make well-informed decisions.
Screening Criteria
The 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 the volume isn’t enough, it will not attract individual investors).
Here are two out of the four stocks that passed the screen:
Ardmore Shipping: Based in Pembroke, Bermuda, this company engages in the seaborne transportation of petroleum products and chemicals worldwide. ASC shares have gained 25.4% over the past six months, outperforming the industry’s 21.9% rise.
Earnings per share (EPS) estimates for ASC have moved north to $2.60 from $2.44 per for 2024 over the past 30 days. Earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched on one occasion, the average surprise being 5.6%. ASC currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A. This score helps to identify stocks with the most attractive value, growth and momentum.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DHT Holdings: This Hamilton, Bermuda-based company owns and operates crude oil tankers primarily in Monaco, Singapore and Norway. The company’s shares have gained 22.4% over the past six months, outperforming the industry’s 21.9% rise. DHT currently carries a Zacks Rank #3.
Earnings estimates for DHT indicate 43.4% year-over-year growth on 17.8% higher revenues. The stock has a VGM Score of B.
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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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