The one lesson we always try to remind our readers is that you should always be responsible for doing your own homework before putting your money to work. We are hit with information on which stocks to buy from every direction, and while it is important to read as much as you can, you should be responsible for making the ultimate decision on which stocks you do or do not add to your portfolio. Having said that… a great place to start your screening process is with stocks that are getting high ranks on Wall Street.
No one is perfect, and even the best and most talented analysts sometimes do get it wrong, but on the whole you have to be willing to put some faith in what analysts see for a stock’s future. Remember, analysts are following the market full-time. This is their job, and their insights are very valuable and should be taken into consideration when narrowing your list of potential buy targets.
Analysts typically assign a rating to a stock that can vary from a “strong sell” up to a “strong buy”. You will generally find that the bulk of analysts covering a stock will all land around the same rating, so you can ignore the outliers and focus in on which rating the stock gets the most and progress accordingly.
Obviously, you want to see as many as “strong buy” ratings as possible. If an overwhelming number of analysts believe the underlying security deserves a “strong buy” rating, there is more than likely something positive going on with the stock. Keep in mind, there are many reasons why a stock could get such a rating, and not all of the reasons would be enough, on their own, to warrant buying the stock. Perhaps a stock has seen its value drop 50% following a couple bad quarterly reports. From a valuation standpoint, shares may appear incredibly undervalued, and this could result in a “strong buy” rating. Maybe the value is enough of a reason to jump in, but you have to make sure there are enough other positives in place to warrant the stock turning things around.
Let’s take a look at five stocks that get high ratings, that appear to be in a good position to build on recent gains and warrant consideration for a possible addition to your portfolio.