4 Stocks Predictive Analysts Expect To Outperform

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 |  Includes: AVGO, IR, TRV, TSS
by: Kapitall

Although it is helpful to search for companies that analysts are bullish on, it is also helpful to search for groups of analysts that are historically correct. If those analysts are bullish on a company, it is probably worthwhile to take a second look.

Using analyst ratings from Reuters that are presented on a linear scale (with 1 = "Strong Buy" and 5 = "Strong Sell"), we sliced the ratings data of stocks of the S&P 500 into three time periods separated by a month, and identified the groups of analysts that have shown predictive value, i.e. been able to accurately predict the direction of stock moves for two consecutive time periods.

We further narrowed down the list by only focusing on those stocks that have seen bullish trends in analyst opinion. In other words, predictive analysts, with a proven (short-term) track record of predicting their stock's direction, think these stocks are due for a rebound.

Although past performance is no guarantee of future results, the recent accuracy of these analyst ratings suggests their opinions may be a helpful starting-off point for your own analysis.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. (To access a complete analysis of this list's recent performance, click here.)



Do you think these stocks will outperform? Use this list as a starting-off point for your own analysis.

List sorted by dividend yield.

1. The Travelers Companies, Inc. (NYSE:TRV): Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Market cap of $19.60B. Dividend yield at 3.50%, payout ratio at 28.16%. Mean average rating changed from 2.5 to 2.54 between 07/04/11 and 08/03/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -3.01%. Analysts also got it right between 08/03/11 and 09/02/11, with the mean rating changing from 2.54 to 2.44 (bullish change). Over the following month, the stock generated an alpha of 2.13% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.44 to 2.36 between 09/02/11 and 10/02/11 (i.e. bullish change). The stock has lost 7.67% over the last year.

2. Ingersoll-Rand Plc (NYSE:IR):
Engages in the design, manufacture, sale, and service of a portfolio of industrial and commercial products in the United States and internationally. Market cap of $8.76B. Dividend yield at 1.81%, payout ratio at 11.94%. Mean average rating changed from 2.13 to 2.27 between 07/04/11 and 08/03/11 (bearish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of -0.18%. Analysts also got it right between 08/03/11 and 09/02/11, with the mean rating changing from 2.27 to 2.36 (bearish change). Over the following month, the stock generated an alpha of -11.85% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.36 to 2.27 between 09/02/11 and 10/02/11 (i.e. bullish change). The stock is currently stuck in a downtrend, trading 18.74% below its SMA20, 18.6% below its SMA50, and 38.58% below its SMA200. It's been a rough couple of days for the stock, losing 18.8% over the last week.

3. Total System Services, Inc. (NYSE:TSS): Provides electronic payment processing and other services to card-issuing and merchant acquiring institutions. Market cap of $3.27B. Dividend yield at 1.65%, payout ratio at 27.56%. Mean average rating changed from 2.8 to 2.79 between 07/04/11 and 08/03/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 1.57%. Analysts also got it right between 08/03/11 and 09/02/11, with the mean rating changing from 2.79 to 2.75 (bullish change). Over the following month, the stock generated an alpha of 4.91% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.75 to 2.63 between 09/02/11 and 10/02/11 (i.e. bullish change). The stock has gained 13.15% over the last year.

4. Broadcom Corp. (BRCM): Designs and develops semiconductors for wired and wireless communications. Market cap of $17.18B. Dividend yield at 1.12%, payout ratio at 18.13%. Mean average rating changed from 2.09 to 2.06 between 07/04/11 and 08/03/11 (bullish change). Analysts correctly predicted the direction of the stock over the next month, with the stock generating an alpha of 2.61%. Analysts also got it right between 08/03/11 and 09/02/11, with the mean rating changing from 2.06 to 2.09 (bearish change). Over the following month, the stock generated an alpha of -0.72% relative to the S&P 500 index, as predicted by the analysts. This same group of analysts now expect the stock to outperform in the future, with the mean rating changing from 2.09 to 1.98 between 09/02/11 and 10/02/11 (i.e. bullish change). The stock is currently stuck in a downtrend, trading 6.82% below its SMA20, 6.7% below its SMA50, and 14.5% below its SMA200. It's been a rough couple of days for the stock, losing 6.3% over the last week.

Analyst ratings sourced from Reuters; price data sourced from Yahoo! Finance; all other data sourced from Finviz. Data pulled Oct 4.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.