Yahoo Finance Find Strong Stocks to Buy for 2023 with New Analyst Coverage
Stocks closed lower for the fourth straight session to start the week as Wall Street grows increasingly worried about a continually hawkish Fed. Stocks were a bit more mixed through morning trading on Tuesday, but investors are starting to run out of time for the Santa Claus rally everyone was hoping for.
The central bank lifted its core interest rate at the fastest pace since 1980, and the Fed Funds rate is now at a 15-year high range of between 4.25% and 4.5%. Investors are focused on the fact the Fed is now possibly set to raise its core rate to between 5% and 5.5% in 2023 and maintain that level until some point in 2024. This marks a substantial increase from September when Jay Powell and Co. anticipated having to lift its core rate to 4.6% by the end of 2023.
Wall Street seems worried that a rate that high all but guarantees that the U.S. economy falls into a recession next year. But this could be a silver lining for traders who seem to think the economy will look rough enough to warrant cuts sooner than later.
Wall Street is growing increasingly out of whack with what Powell and the Fed are doing and saying. The 2-year U.S. Treasury yield is at 4.28% on Tuesday, which remains well beneath its peak of 4.75% in early November. The 2-year yield largely reflects where Wall Street thinks the Fed Funds rate will end up.
The S&P 500’s recent fall has pushed it back below its 50-day moving average after it fell below its 200-day earlier this month. Still, the benchmark is up around 5.5% in the fourth quarter and investors must always remember that Wall Street is often ahead of Main Street.
Plus, there have been many stocks and a few pockets of the market that have soared in 2022 and could be poised to keep climbing in 2023.
Today we utilized our new analyst coverage screen to help investors find stocks that are gaining more attention from Wall Street that could be potential winners in 2023...
New Analyst Coverage
Broker recommendations play their part no matter how investors feel about them. And we seemingly all take a look no matter what. Individual investors, large institutional portfolio managers, and everyone in between are likely pleased to see one of their stocks get an upgraded rating or a new analyst cover the company.
Investor interest can generate more analyst coverage. This helps explain why analysts jump on young, much-hyped and talked about tech companies. Then, as new coverage is initiated, the company and the stock become more visible, which in turn often leads to more demand potential and therefore the possibility of higher prices.
Plus, analysts almost always initiate coverage with a positive recommendation. And the logic follows because why spend all the time and write a research report on a company not widely tracked only to say it’s not good?
When it comes to companies with little to no analyst coverage, one new recommendation can sometimes give portfolio managers the validation 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 search for companies with analyst coverage that has increased over the last 4 weeks. We just look at the number of analyst recommendations today and compare it to the number of analyst recommendations 4 weeks ago.
The rule of thumb here is that an increase in coverage leans bullish and a decrease signals bearish behavior. It is also worth pointing out that, in general, the change in the average broker recommendation is a better indicator than the actual recommendation itself.
On top of that, it is typically more bullish if the increase went from none to one or if the coverage was minimal to begin with. (As the number of analysts climbs the addition of new coverage isn’t earth-shattering.) In the end, increased coverage is still better than decreased coverage, unless the coverage is heading in the wrong direction.
Now let’s try this screen…
• Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago
(This shows stocks where new coverage has recently been added.)
• Average Broker Rating less than Average Broker Rating four weeks ago
(By 'less than', we mean 'better than' four weeks ago.)
• Prices greater than or equal to 5
(We’re applying all of the above parameters to stocks above $5 a share since many money managers won't even look at stocks under $5)
• Average Daily Volume greater than or equal to 100,000 shares
(If there's not enough volume, even individual investors won't want it).
Here are two of the 16 stocks that came through the screen today…
NOW Inc. DNOW - (from 2 analysts four weeks ago to 3)
NOW Inc. (DNOW) is a global supplier of energy and industrial products, as well as packaged, engineered process and production equipment. DNOW is part of the Oil and Gas - Mechanical and Equipment industry that currently ranks in the top third of over 250 Zacks industries.
NOW Inc. sells its products and solutions to exploration and production companies, as well as midstream transmission and storage firms, refineries, chemical companies, manufacturers, engineering operations, construction companies, and beyond.
NOW Inc. has benefited from the booming oil and energy comeback in 2022, with its revenue projected to grow 30% in FY22 to help boost its adjusted earnings from $0.08 a share to +$0.89 per share. Zacks estimates call for the company to post growth on both the top and bottom line next year as well.
DNOW shares are up 85% in the last two years, including a 50% climb in 2022. Despite the run, its valuation is enticing and it trades 13% below its current Zacks average price target.
DHT Holdings, Inc. DHT - (from 2 analysts four weeks ago to 3)
DHT is an independent crude oil tanker company. DHT’s fleet trades internationally and consists of crude oil tankers in the VLCC segment. DHT is part of the Transportation – Shipping segment that currently ranks in the top 30% of over 250 Zacks industries and its outlook is impressive as the segment benefits from pricing power and other tailwinds.
Zacks estimates call for its revenue to surge 36% in 2022 and another 42% in 2023. At the bottom end, DHT is projected to swing from an adjusted loss of -$0.23 per share to +$0.22 a share and then soar to $1.17 per share in 2023.
DHT shares have climbed 75% in 2022 and 150% in the last five years to blow away the S&P 500’s 42% and its industry’s 20%. Even with the huge run, DHT shares are trading near two-year lows at 7.9X forward 12-month earnings. And it currently trades 33% below its average Zacks price target.
Many 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 you can with the Research Wizard. And you can backtest it all. Find out how to pick the right stocks right now by taking a free trial to the Research Wizard stock picking and backtesting program.
Click here to sign up for a free trial to the Research Wizard today.
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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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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DHT Holdings, Inc. (DHT) : Free Stock Analysis Report
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