Chicago, IL – November 9, 2010 - Stocks in this week's article include American Express Company AXP, Complete Production Services, Inc. CPX, NIC Inc. EGOV, The Estee Lauder Companies Inc. EL and GT Solar International, Inc. SOLR. Kevin Matras explains why looking for stocks with upgraded broker ratings can upgrade your portfolio to a whole new level.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
While nobody can perfectly predict a broker upgrade or guard against a downgrade, it's important to know how the market reacts to these things, so you can stay in your upgraded winners (or buy if you're on the fence) and consider getting out if a downgrade comes your way.
One thing I've been doing lately is screening for stocks that have recently seen a broker rating upgrade. Tests have proven that stocks with broker rating upgrades outperform those that don't get upgraded and really outperform stocks that get downgraded.
By how much?
I created three screens and ran some tests over the last 10 years. The tests pretty much confirmed what I had already suspected – but the magnitude was a lot larger than I thought.
The broker rating upgrades over the last 10 years showed an average annual return of 10.4%.
The ones with no rating change at all showed an average annual rerun of 6.1%.
And the stocks with broker rating downgrades actually showed a loss of -0.3%.
So the upgrades beat the ones with no rating change by nearly twice as much. And they outperformed those with downgrades even more. In fact, that was the difference between making money and losing money.
Below are 5 stocks that have all been upgraded within the last 4 weeks...
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AMER EXPRESS CO (AXP): Free Stock Analysis Report
COMPLETE PRODUC (CPX): Free Stock Analysis Report
NIC INC (EGOV): Free Stock Analysis Report
ESTEE LAUDER (EL): Free Stock Analysis Report
GT SOLAR INTL (SOLR): Free Stock Analysis Report
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