Zacks.com Featured Expert Kevin Matras Highlights: Constellation Energy Partners, Kaydon Corporation and OMRIX Biopharmaceuticals.CHICAGO -- Kevin Matras explains why investors should seek out stocks with new analyst coverage. Stocks in this week's article are Constellation Energy Constellation Energy (NYSE: CEG), headquartered in Baltimore, Maryland, generates, trades, supplies, and distributes energy. The company operates over 35 power plants in 11 states (mainly Maryland, Pennsylvania, New York, West Virginia, and California) under its operating Partners, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (NYSE NYSE See: New York Stock Exchange : CEG (Continuous Edge Graphics) A VGA RAMDAC chip from Edsun Labs that adds anti-aliasing on the fly. It can also calculate intermediate shades, thus providing thousands of colors on an 8-bit board that normally generates only 256 colors. ), Kaydon Corporation (NYSE: KDN KDN Korea Electric Power Data Network Co, Ltd KDN Kenya Data Networks Limited (Nairobi, Kenya) ) and OMRIX Biopharmaceuticals, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : OMRI). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109 Screen of the Week written by Kevin Matras of Zacks Investment Research Zacks Investment Research A firm that compiles earnings estimates and brokerage firm investment recommendations for thousands of publicly traded firms. : If you're a regular reader of this article, you know that I'm not a big fan of Broker Recommendations. And as you read on, you'll see that I'm still not. This is largely because of their overwhelmingly bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish bias. But they do have their place. From small individual investors to large institutional portfolio mangers, many people do look at Broker Recommendations when researching investment possibilities. (In general though, I should note that changes in the average broker recommendation are better indicators than the actual recommendation itself.) Today, I want to talk about companies that receive new analyst coverage. One of the things that generate analyst coverage is investor interest. And as new coverage is initiated, it becomes more visible, which in turn means potentially more demand (read higher prices). This is often the case because analysts almost always initiate coverage Initiate coverage (1) Firm is now followed by analysts at a particular securities house; (2) Indication to cover short position by purchasing the underlying stock (this cancels out the short position). with a positive recommendation. And when it comes to companies with little to no analyst coverage, one new recommendation can sometimes give portfolio managers the validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. they need to build a position. (And the more money they can invest, the more they can potentially influence prices.) The best way to use this information is to look for companies whose analyst coverage has increased over the last four weeks. Simply look at the number of analyst recommendations now in comparison to the number of analyst recommendations four weeks ago. An increase in coverage is bullish whereas a decrease in coverage is bearish Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. bearish . It's typically more bullish if the increase went from none to one or if the coverage was minimal at the start. (Moving from 25 to 26 isn't going to have the same impact because that 26th analyst isn't discovering something `new'.) But increased coverage is better than decreased coverage -- assuming the coverage is positive of course. Here's a screen to try: * Number of Broker Ratings four weeks ago less than or equal to 5 (No more than five analysts were covering the stock four weeks ago.) * Number of Broker Ratings now greater than or equal to 6 (There are at least six analysts covering the stock now.) * Average Broker Rating less than Average Broker Rating four weeks ago (By ' less than,' I mean 'better than' four weeks ago.) * Average Broker Rating less than or equal to 3 (I'm not that concerned about the rating itself. But since analysts' recommendations tend to be bullishly biased, I'd prefer to not have them be 'bearish'.) And for good measure ... * % Change in Q(1) Estimates greater than or equal to 0 and ... * % Change in F(1) Estimates greater than or equal to 0 (Companies that receive upward estimate revisions have a tendency of receiving even more upward estimate revisions. This, in combination with the stock's increased visibility due to 'new' coverage, can be quite powerful.) * And I'm applying all of the above parameters to stocks with Prices greater than or equal to 5 (most money managers won't even look at a stock under $5) and Average Daily Volume greater than or equal to 50,000 shares (if there's not enough volume, even individual investors won't want it). There are nine stocks that made it through this week's screen (1/29/06). Here are three of them: CEG < Constellation Energy Partners, LLC KDN < Kaydon Corporation OMRI < OMRIX Biopharmaceuticals, Inc. Get the rest of the stocks on this list and see what new stocks the analysts are talking about. And don't stop there. Try finding companies with no coverage four weeks ago that are finally being looked at today. Most screeners won't let you search for the number of analysts covering a stock, let alone comparing the amount of coverage they had weeks or even months ago. But the Research Wizard Instructional help in an application or system development environment that guides the user through a series of multiple choice questions to accomplish a task. For the most part, wizards are more effective than the help menus found in most applications, which often border on the atrocious. does. The same goes for changes in the Average Broker Rating and Estimate Revisions. And you can backtest it all. Find out how to pick the right stocks right now by learning more about our free trial to the Research Wizard stock picking and backtesting Backtesting The process of testing a trading strategy on prior time periods. Instead of applying a strategy for the time period forward, which could take years, a trader can do a simulation of his or her trading strategy on relevant past data in order to gauge the its effectiveness. program. http://at.zacks.com/?id=111 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. About Screen of the Week Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here http://at.zacks.com/?id=112 About Zacks Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros http://at.zacks.com/?id=113 Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. Disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the : Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual to buy or sell any security. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion