Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

This public program was initiated in collaboration with The Conference Board Task Force on Corporate/Investor Engagement and with Thomson Reuters support of communication technologies. The Forum is providing continuing reports of the issues that concern this program's participants, as summarized  in the January 5, 2015 Forum Report of Conclusions.

"Fair Access" Home Page

"Fair Access" Program Reference

 

Related Projects 2012-2019

For graphed analyses of company and related industry returns, see

Returns on Corporate Capital

See also analyses of

Shareholder Support Rankings

 

 

 

Forum distribution:

New data shows same old problem with published analyst views

 

Source: Dow Jones MarketWatch, June 26, 2017 column

Wall Street really hates giving any stock a ‘sell’ rating

Published: June 26, 2017 1:57 p.m. ET

Not a single S&P 500 stock has majority ‘sell’ ratings from analysts

Getty Images

Con Edison has the highest percentage of “sell” ratings from analysts among all S&P 500 stocks.

 

By

Philip

van Doorn


 Investing columnist

 

 

A new set of data from FactSet underlines why investors need to take stock ratings provided by brokers with a grain of salt: Not a single S&P 500 company has majority “sell” ratings.

A year ago there was just one.

Of the 11,257 ratings that analysts have on S&P 500 SPX stocks, 49% are “buy” ratings, 45% are neutral — and only 6% are “sell” ratings,” according to a June 23 report from FactSet analyst John Butters.

A “sell-side” analyst is one who works for a brokerage firm or on the brokerage side of an investment bank, providing research reports and ratings to brokerage clients and often making them available to the financial media. The firm’s bankers also use the reports when pitching for business. A “buy-side” analyst is one who works for professional investors, including hedge funds.

So sell-side analysts are the ones being quoted most often, especially when you see monotonous quarterly headlines saying which companies have beaten or missed consensus earnings estimates. Their earnings estimates and ratings, in turn, can help drive stocks higher, so it’s important to consider their opinions.

It may not surprise you that most companies beat estimates each quarter, no matter what is going on in the economy. If sales and earnings are weak, analysts will often lower their estimates heading into earnings season, sometimes in response to companies lowering their earnings guidance.

A conversation with almost any sell-side analyst will highlight a deep level of knowledge of the industry he or she covers, along with an approach to ratings that is based on price targets, which themselves are based on estimates for sales, earnings and cash flow. But there’s no denying that analysts shy away from placing the equivalent of a “sell” rating on a stock, or that “good news” (including good ratings) makes it easier for brokerage companies to earn commissions as investors buy shares.

Gary Lutin, the chairman of the Shareholder Forum (which supports access to information investors need) and a former investment banker, said it was “sad” that “the current marketplace for financial services doesn’t offer jobs that will pay all these talented and highly skilled professionals to offer advice that doesn’t ring a banker’s cash register.”

In other words, investors still face the same challenge of figuring out how to get the best information on which to base their investment decisions. This is why it pays to do your own research (reading not only analysts’ reports but company filings, news articles, and industry and academic reports), which your broker or investment adviser can help you with, at least partially. Form your own opinions about a company’s strategy to dominate its industry over the long term.

Takeaways from the FactSet data

Analysts are most “optimistic” about the health-care and information technology sectors, according to Butters, as both have the highest percentage of “buy” ratings: 57%. Here are ratings percentages for all 11 sectors of the S&P 500.

 

 

Sector

Share ‘buy’ ratings

Share neutral ratings

Share ‘sell’ ratings

Total return - 12 months through June 23

Health Care

57%

40%

4%

15%

Information Technology

57%

38%

5%

35%

Energy

55%

39%

6%

-5%

Materials

52%

43%

4%

14%

Industrials

48%

47%

5%

21%

Consumer Discretionary

47%

47%

6%

15%

Financials

44%

50%

6%

28%

Real Estate

42%

53%

5%

4%

Consumer Staples

40%

53%

7%

6%

Utilities

33%

59%

7%

9%

Telecommunications

28%

65%

7%

-9%

S&P 500

49%

45%

6%

18%

Source: FactSet

Note: Because of rounding, the percentages for the ratings may not add up to 100%.

So positive sentiment is low for the utilities and telecommunications sectors, but none of the sectors have double-digit levels of negative sentiment.

Top-rated heath care companies

Here are the 10 S&P 500 health-care companies with the highest percentages of “buy” ratings:

Company

Ticker

Share ‘buy’ ratings

Share neutral ratings

Share ‘sell’ ratings

Closing price - June 23

Consensus price target

Implied 12-month upside potential

UnitedHealth Group Inc.

UNH

96%

0%

0%

$185.25

$191.08

3%

Envision Healthcare Corp.

EVHC

95%

5%

0%

$60.65

$73.82

22%

Mallinckrodt PLC

MNK

94%

6%

0%

$46.32

$71.37

54%

Align Technology Inc.

ALGN

93%

7%

0%

$153.50

$160.92

5%

Thermo Fisher Scientific Inc.

TMO

89%

11%

0%

$174.44

$187.88

8%

Celgene Corp.

CELG

83%

14%

3%

$134.31

$142.69

6%

Alexion Pharmaceuticals Inc.

ALXN

77%

23%

0%

$126.07

$155.60

23%

Cigna Corp.

CI

76%

24%

0%

$169.61

$177.05

4%

Incyte Corp.

INCY

76%

24%

0%

$136.28

$146.71

8%

Boston Scientific Corp.

BSX

75%

25%

0%

$28.10

$29.48

5%

Source: FactSet

You can click on the tickers for more information, including news, estimates and company filings.

Top-rated IT companies

Here are the 10 S&P 500 IT companies with the highest percentages of “buy” ratings:

Company

Ticker

Share ‘buy’ ratings

Share neutral ratings

Share ‘sell’ ratings

Closing price - June 23

Consensus price target

Implied 12-month upside potential

Broadcom Ltd.

AVGO

94%

6%

0%

$245.26

$276.45

13%

Facebook Inc. Class A

FB

91%

9%

0%

$155.07

$170.59

10%

Salesforce.com Inc.

CRM

87%

11%

2%

$88.62

$102.40

16%

Alphabet Inc. Class A

GOOGL

86%

12%

2%

$986.09

$1,058.98

7%

Alphabet Inc Class C

GOOG

86%

12%

2%

$965.59

$1,057.95

10%

Lam Research Corp.

LRCX

86%

9%

5%

$151.78

$163.30

8%

Micron Technology Inc.

MU

84%

16%

0%

$31.73

$39.37

24%

Visa Inc. Class A

V

84%

16%

0%

$95.58

$103.14

8%

Harris Corp.

HRS

80%

20%

0%

$111.39

$122.11

10%

Applied Materials Inc.

AMAT

79%

17%

4%

$44.09

$50.45

14%

Western Digital Corp.

WDC

79%

21%

0%

$93.34

$114.25

22%

Source: FactSet

There are really 11 stocks listed here because Alphabet Inc. (Google’s holding company) has two publicly traded classes of common shares.

Companies with highest levels of “sell” ratings

While there isn’t a single S&P 500 company with majority “sell” ratings, it can still be useful to know which ones have the highest percentages of negative ratings:

Company

Ticker

Share ‘buy’ ratings

Share neutral ratings

Share ‘sell’ ratings

Closing price - June 23

Consensus price target

Implied 12-month upside potential

Torchmark Corp.

TMK

0%

55%

45%

$75.68

$73.13

-3%

Consolidated Edison Inc.

ED

0%

59%

41%

$83.84

$76.50

-9%

Assurant Inc.

AIZ

17%

50%

33%

$101.25

$99.75

-1%

Western Union Co.

WU

17%

50%

33%

$19.17

$19.32

1%

News Corp. Class B

NWS

67%

0%

33%

$14.05

$17.05

21%

Transocean Ltd.

RIG

22%

47%

31%

$8.09

$12.30

52%

Paychex Inc.

PAYX

5%

65%

30%

$59.24

$58.02

-2%

Helmerich & Payne Inc.

HP

30%

40%

30%

$52.74

$62.44

18%

Campbell Soup Co.

CPB

6%

65%

29%

$53.58

$57.88

8%

VeriSign Inc.

VRSN

0%

71%

29%

$93.96

$89.80

-4%

Source: FactSet

It’s fascinating to see that even on a list of stocks with the highest percentages of “sell” ratings, there is one company — News Corp. NWS the parent company of Dow Jones and MarketWatch — that still has a majority of analysts recommending investors buy the shares.

 

Copyright ©2017 MarketWatch, Inc.
 

This Forum program was open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the purpose of this public Forum's program was to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant was expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated in 2012 in collaboration with The Conference Board and with Thomson Reuters support of communication technologies to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices. The website is being maintained to provide continuing reports of the issues addressed in the program, as summarized in the January 5, 2015 Forum Report of Conclusions.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to access@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.