Zacks
Zacks.com featured highlights include article Kraton, aTyr Pharma, Grupo Financiero Galicia, Grupo Supervielle and Calithera Biosciences
Some investors are rotating out of earlier high flying technology stocks into cheap emerging markets. · Zacks
Zacks Equity Research
Updated

For Immediate Release

Chicago, IL – October 11, 2017 - Stocks in this week’s article Kraton Corporation (NYSE: KRA – Free Report), aTyr Pharma, Inc. (Nadsaq: LIFE – Free Report), Grupo Financiero Galicia S.A. (Nadsaq: GGAL – Free Report), Grupo Supervielle S.A. (NYSE: SUPV – Free Report) and Calithera Biosciences, Inc. (Nadsaq: CALA – Free Report).

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5 Stocks to Add to Your Portfolio on New Analyst Coverage

Many investors have immense faith in research work by analysts as they fear that lack of information while exploring on their own might trigger inefficiencies. Here, analysts play a vital intermediary role with their extensive access to relevant data.

Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts to cover it. In other words, they believe that the company coming under the microscope definitely has some value.

Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investors’ focus on a stock motivates analysts to take a closer look at it. After all, who doesn’t love to produce something that is already in demand? Hence, we often find that analysts’ ratings on newly added stocks are more favorable than their ratings on continuously covered stocks.

It is needless to say, the average change in broker recommendation is more preferable than 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 is witnessed with a rating upgrade under an existing coverage. Positive recommendations – Buy and Strong Buy – generally lead to a significantly 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.

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