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New Analysts Initiate Coverage: Top 5 Stocks on Radar

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·5-min read
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Coverage initiation on a stock by analyst(s) helps in interpreting information pertaining to capital markets, thereby creating value for investors. Lack of information creates inefficiencies that might trigger misinterpretation of stocks (over- or under-valued).

Bancolombia S.A. CIB, Lantheus Holdings, Inc. LNTH, A-Mark Precious Metals, Inc. AMRK, Patrick Industries PATK and LCI Industries LCII are some stocks that have seen new analyst coverage lately and are therefore expected to attract investors' attention.

In fact, coverage initiation usually depicts increased investor inclination. Investors, on their part, often assume that there is something in the stock that has attracted analyst attention. In other words, they believe that the company coming under the microscope definitely has some value.
Obviously, stocks are not arbitrarily chosen to cover. New coverage on a stock usually reflects an encouraging future envisioned by the analyst(s). At times, increased investor focus on a stock motivates analysts to take a closer look at it.

It is to be noted that the average change in broker recommendation is preferred over a single recommendation change.

How Does Analyst Coverage Influence Stock Price?

The price movement of a stock is generally a function of the recommendations on it from new analysts. Stocks typically see an upward price movement with a new analyst coverage compared to what they witness with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significantly more positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.

Now, if an analyst gives a new recommendation on a company that has very few or no existing coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.

So, it’s a good strategy to bet on stocks that have seen increased analyst coverage over the last few weeks.

Screening Criteria

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 five out of the 18 stocks that passed the screen:

Bancolombia S.A.: Based in Medellín, Colombia, this banking company operates in Colombia, Panama, Puerto Rico, El Salvador, Costa Rica, and Guatemala.

CIB currently carries a Zacks Rank #1 (Strong Buy). The stock has gained 15.5% over the past year versus the industry’s 12.2% decline. Earnings estimates for 2022 have increased 2.7% over the past 30 days to $5.30 per share. The estimated figure calls for a 24.1% increase from the year-ago period. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lantheus Holdings: headquartered in North Billerica, MA, Lantheus develops, manufactures, and commercializes diagnostic and therapeutic products.

LNTH currently carries a Zacks Rank #1. The stock has gained 182.2% over the past year versus the industry’s 28.5% decline. Earnings estimates for 2022 have increased 51.2% over the past 30 days to $3.04 per share. The estimated figure calls for a 520.4% increase from the year-ago period.

A-Mark Precious Metals: Based in El Segundo, CA, this company operates as a precious metals trading company.

AMRK currently carries a Zacks Rank #1. The stock has gained 27.6% over the past year versus the industry’s 17.4% growth. Earnings estimates for 2022 have increased 27% over the past 30 days to $10.43 per share.

Patrick Industries: Elkhart, IN, this company is a leading component solutions provider for the RV, marine, and manufactured housing industries.

PATK currently carries a Zacks Rank #1. The stock has declined 29.6% over the past year versus the industry’s 24% decline. Nonetheless, earnings estimates for 2022 have increased 19.7% over the past 30 days to $13.16 per share. The estimated figure calls for a 36.7% increase from the year-ago period.

LCI Industries: Based in Elkhart, IN, manufactures recreational vehicles components and for adjacent industries in the United States and internationally.

LCII currently carries a Zacks Rank #2 (Buy). The stock has declined 21.7% over the past year versus the industry’s 52.2% decline. Nonetheless, earnings estimates for 2022 have increased 2.7% over the past 30 days to $14.76 per share. The estimated figure calls for a 30.2% increase from the year-ago period.

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.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard 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: https://www.zacks.com/performance


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BanColombia S.A. (CIB) : Free Stock Analysis Report
 
AMark Precious Metals, Inc. (AMRK) : Free Stock Analysis Report
 
Lantheus Holdings, Inc. (LNTH) : Free Stock Analysis Report
 
Patrick Industries, Inc. (PATK) : Free Stock Analysis Report
 
LCI Industries (LCII) : Free Stock Analysis Report
 
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