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Thursday
Dec152011

A Look at Analyst Ratings

Below we take an in-depth look at S&P 500 analyst ratings using Bloomberg data.  In the first chart below, we highlight which sectors have the highest number of analyst ratings per stock.  As shown, the Telecom, Technology and Energy sectors have by far the highest number of ratings per stock at 27+.  For the S&P 500 as a whole, 22.3 analysts cover the average stock in the index.  At the low end of the spectrum is Materials and Utilities, which both have less than 17 analyst ratings per stock. 

Interestingly, while Financial stocks are some of the most closely followed names at the moment, just 22.2 analysts cover the average stock in the sector, which is just under the average for the the entire index.  Maybe it has something to do with analysts not wanting to be critical of other companies in their own sector, especially when it's the most beaten down sector in the market right now.

ln our next chart we highlight the average percentage of buy ratings (out of the total number of ratings) for each S&P 500 sector.  As shown, the average stock in the entire index has 53% buy ratings.  The Energy sector is by far and away the top rated sector with 65% buy ratings.  We would have thought Technology would have had the highest percentage of buy ratings because it's such a growth sector, but in actuality, it has just 54% buy ratings, which is just barely higher than the reading for the entire S&P 500.  The Utilities sector has by far the lowest percentage of buy ratings at 37%, which is ironic since it's currently the best performing sector year to date.

Just 6.1% of all ratings in the S&P 500 are sell ratings, which shows just how lopsidedly bullish the entire ratings system is.  The Financial sector has the highest percentage of sell ratings at 8.2%, followed by Consumer Staples (7.8%) and Materials (7.2%).  Health Care has the lowest percentage of sell ratings at 3.7%.

Below we highlight the 25 individual S&P 500 stocks with the highest percentage of buy ratings.  There are two stocks in the index with 100% buy ratings, but these two stocks -- SNA and LUK -- have just 4 and 1 analysts covering them respectively.  Agilent Technologies (A) has the highest percentage of buy ratings (94%) of the stocks with a large number of analyst coverage.

While the Financial sector overall has relatively bearish ratings at the moment, JP Morgan (JPM) is tied for fourth with the highest percentage of buy ratings at 92%.  Four other Financial sector stocks are in the top 25 -- PRU, SLM, AMP and CBG. 

Both Google (GOOG) and Apple (AAPL) make the list at 90% and 88% respectively.  Until recently, Apple had a reading in the 90s, however, so it has actually dropped off a bit.

While they are currently the most loved by analysts, the average stock in the list below is down 8.66% year to date.  This is twice as bad as the average year to date change of -4.35% for all S&P 500 stocks.

Sears Holdings has by far the highest percentage of sell ratings at 83%, but keep in mind that just six analysts currently cover the stock.

The average stock that makes up the list of the 25 names with the highest percentage of sell ratings is down 17.11% year to date, which is much worse than the average stock in the entire index.

Finally, below is a list of the S&P 500 stocks with the highest amounts of analyst coverage.  As shown, the top 9 stocks on the list are Technology stocks, with Apple at the top of the list at a whopping 57.  Because Apple has such a high number of analysts covering the stock, the fact that it has 88% buy ratings is pretty impressive.  Intel (INTC) ranks second with 54 analysts covering the stock.  Intel has just 56% buy ratings, however.  Cisco (CSCO) ranks third at 47, followed by Broadcom (BRCM) at 45.

The average year to date change of the stocks on the list below is -12.78%, which is three times as bad as the average YTD change for all S&P 500 stocks.

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