Zacks
5 Stocks with Upgraded Broker Ratings
Zacks Equity Research
Updated

Investors strive to design a portfolio of stocks that will fetch them handsome returns. However, the task is easier said than done. This is because the investing world is fraught with uncertainties and stock prices are sensitive to recent developments. Moreover, a plethora of stocks flood the market at any given point of time which makes the task of choosing the right stock more daunting.

Additionally, the same group of stocks may not work under all circumstances. For example, airline stocks may benefit from declining oil prices but may fall out of favor in the event of oil prices moving up. One of the well-accepted strategies to brave market uncertainties is to maintain a well-diversified (i.e. include stocks from different industries) portfolio.

This clearly suggests that one needs to have in-depth knowledge of the minute details of the investing space. This is quite impossible for individual investors, particularly because of the time constraint that we all face these days. Consequently, advice of “experts” in this field is much sought after by investors.

Expert Advice from Brokers

The experts in the investing world are brokers. Generally, three types of brokers (sell-side, buy-side and independent) are present in the investment world, with sell-side analysts being the most common. They are employed by various brokerage firms to provide unbiased opinion to investors on the stocks under their coverage after thorough research. Buy-side analysts are employed by hedge funds, mutual funds etc. while the independent ones simply sell their reports to investors.

All types of brokers indulge in thorough research of the stocks under their coverage. They have access to much detailed information on a company. Toward this end, they attend company conference calls/presentations and scrutinize every detail available publicly before advising investors. Naturally, broker advice acts as an invaluable guide for investors in their bid to garner the maximum from their portfolios.

Earnings Estimate Revisions – An Invaluable Pointer

Since brokers follow stocks in their coverage minutely, they revise their earnings estimates on a stock after carefully examining the pros and cons of an event for the concerned company. All the decisions by brokers are backed by solid logic or justification and thus estimate revisions serve as an important pointer regarding the price of a stock.

For instance, an earnings beat by a company generally leads to upward estimate revisions with prices moving north. Similarly, lackluster earnings results often lead to stock price depreciation. Investors tend to be guided by the direction of estimate revisions and stock price while formulating their investment strategy. To take care of the earnings performance, we have designed a screen based on improving analyst recommendation and upward estimate revisions over the last four weeks.

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