By Philip van Doorn
Traders in the stock market can take advantage of special situations to exploit sentiment and momentum and make quick profits — if they are quick enough or lucky enough. But over the long haul, investors have profited by holding shares of companies that increase sales, earnings and cash flow. And the resulting increases in analysts’ ratings can help lift stock prices.
Below is a list of stocks among the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.11% that have had the biggest increases in “buy” or equivalent ratings this year among analysts polled by FactSet. An upgrade may mean a stock has fallen enough so that an analyst believes it has become a compelling value. Or it may mean that something has changed for the better in the company’s business or industry. Or it could be a combination these and other factors.
A focus on the positive side of the ratings action makes sense. Analysts working for brokerage firms — those that provide recommendations to investor clients — are separated from the firms’ business groups that generate fees by providing various services to some of the same companies the analysts cover. But there is still a far greater tendency for these so-called sell-side analysts to assign “buy” or equivalent “overweight” ratings than “sell” or equivalent “underweight” ratings.
Among the S&P 500, 270 companies have majority “buy” or equivalent ratings among analysts polled by FactSet, but only two (American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL -3.72% and Lumen Technologies Inc. /zigman2/quotes/200067545/composite LUMN -0.16% ) have majority “sell” or equivalent ratings.
An increase in the number of “buy” ratings doesn’t necessarily mean all the new “buys” resulted from upgrades. The number of analysts covering any one company often changes. An analyst might initiate coverage with a “buy” rating. Brokerage firms often add or drop coverage of companies or even entire industries because of staff changes or reallocation of resources.
Biggest increases in ‘buy’ ratings
Here’s a list of 22 companies among the S&P 500 that now have at least three more “buy” ratings than they did at the end of 2020:
The table is sorted in two ways — first by the increase in the number of “buy” ratings, but then by the current percentage of “buy” ratings. You will need to scroll the table to see all the data.
So ConocoPhillips /zigman2/quotes/207605056/composite COP +1.51% tops the list because it has five more “buy” ratings than it did on Dec. 31 and because 96% of analysts polled by FactSet currently rate the shares a “buy.”
The second company on the list, Chevron Corp. /zigman2/quotes/205871374/composite CVX +0.95% , has also had its number of “buy” ratings increase by five, but 68% of the analysts rate the stock a “buy.”
Third on the list is Intel Corp. /zigman2/quotes/203649727/composite INTC -11.68% , also with five additional “buy” ratings but with only 38% of analysts having a positive rating on the shares.
Highest percentage ‘buy’ ratings
Here’s a list of 21 S&P 500 companies with the highest percentage of “buy” ratings among analysts polled by FactSet:
The first two companies, Assurant Inc. /zigman2/quotes/202796064/composite AIZ +0.34% and Teledyne Technologies Inc. /zigman2/quotes/203527738/composite TDY +0.42% , haven’t gained any “buy” ratings since the end of 2020, however, Teledyne has one fewer total ratings, which is why it is now 100% buy-rated according to FactSet’s data.
There are six companies involved with oil production or distribution on the first list and four on the second, showing analysts’ growing confidence in the oil price recovery.
Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -2.90% is fourth on the second list, with 96% “buy” ratings. The internet retail pioneer’s founder, Jeff Bezos, announced on Feb. 2 that he would step down as CEO during the third quarter, while remaining executive chair. Here’s a look at how well Amazon’s stock has performed since it went public in May 1997.