Chicago, IL – September 7, 2010 - Stocks in this week's article include China Telecom Corporation Ltd. CHA, G-III Apparel Group, Ltd. GIII, Zhongpin Inc. HOGS, Northern Oil and Gas, Inc. NOG and Steven Madden, Ltd. SHOO. Kevin Matras explains why stocks with new analyst coverage are stocks you want to own.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
Today I want to talk about companies that receive new analyst coverage. One of the things that generate analyst coverage is investor interest. New coverage makes a company more visible, which in turn means potentially more demand (read higher prices).
This is often the case because analysts almost always initiate coverage with a positive recommendation. (Why write a research report on a company not widely followed only to say that it stinks?)
For companies with little to no analyst coverage, that one new recommendation can sometimes give portfolio managers the validation 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 with analyst coverage that has increased over the last four weeks. Take a 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 is bearish.
It's typically more bullish if the increase went from none to one or if the coverage was minimal to begin with. (Going from 25 to 26 isn't going to have the same impact because that 26th analyst isn't discovering anything 'new'.) But increased coverage is better than decreased coverage –- assuming the coverage is positive of course.
Here's a screen to try:
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CHINA TELCM-ADR (CHA): Free Stock Analysis Report
G-III APPAREL (GIII): Free Stock Analysis Report
ZHONGPIN INC (HOGS): Free Stock Analysis Report
STEVEN MADDEN (SHOO): Free Stock Analysis Report
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