The screening process for option-selling watchlists include fundamental analysis, technical analysis and common-sense screens. The BCI team is now adding a new screen the mean analyst rating (MAR) to replace the Scouter Rating we have been using for years. This will add an “institutional” component to our analysis.
What is MAR?
An investment analyst is a financial professional with expertise in evaluating financial and investment information, typically for the purpose of making buy, sell and hold recommendations for securities. In order to reach an opinion and communicate the value and risk of a covered security, analysts research financial statements, listen in on conference-calls and talk to managers and the customers of a company, in an attempt to determine findings for a research report. Ultimately, the analyst decides whether the stock is a “buy,” sell,” or hold.”
The Scale of Ratings
The analyst ratings scale is more involved than the traditional classifications of “buy, hold and sell.” There are now various categories that include multiple terms for each of the ratings (“sell” is also known as “strong sell,” “buy” can be labeled as “strong buy”), as well as a couple of new terms: underperform and outperform.
Stock recommendation Range
Additionally, not every firm adheres to the same ratings terminology: an “outperform” for one firm may be a “buy” for another and a “sell” for one may be a “market perform” for another. Thus, when using ratings, it is advisable to use a consensus figure like mean analyst rating
Let’s review the traditional ratings of “sell,” “underperform,” “hold,” “outperform” and “buy”.
- Buy: Also known as strong buy and “on the recommended list.” This is a recommendation to purchase a specific security.
- Sell: Also known as strong sell, it’s a recommendation to sell a security
- Hold: A hold recommendation is expected to perform at the same pace as comparable companies or in-line with the market moving forward.
- Underperform: A recommendation that means a stock is expected to do slightly worse than the overall stock market return. Underperform can also be expressed as “moderate sell,” “weak hold” and “underweight.”
- Outperform: Also known as “moderate buy,” “accumulate” and “overweight.” Outperform is an analyst recommendation meaning a stock is expected to do slightly better than the market return.
It is best to view these recommendations as a consensus stat with at least 3 analyst reviews. These consensus stats should then be used in conjunction with other fundamental, technical and common-sense parameters when making our investment decisions.
Sample free site with MAR stats: finviz.com
Location of MAR stats in our Premium Stock reports
The BCI team will eliminate all stocks with MAR Ratings higher than “3” For those securities remaining, we will publish the precise stats to assist our members in making the best investment decisions possible.
Analysts’ recommendations are the culmination of analyzing equity research reports and should be used in conjunction thorough investment methodologies in order to make investment decisions. Additionally, “buy, hold and sell” recommendation meanings are not as cut-and-dry as they first appear; a series of terms and differences in meanings exist behind the basic terminology.
Florida State College at Jacksonville
BCI welcomes students and faculty of this fine learning institution which now includes my book, Stock Investing for Students, in its finance curriculum.
April 5th stock report
Will be published late Sunday to early Monday as Barry recovers from his new bionic knee… can’t keep a good man down!
Quinnipiac GAME Forum
International forum for college and graduate school finance majors
Alan will be hosting a free webinar for the Options Industry Council (OIC) on generating income from selling options. Click here to register for free.
All Stars of Options
Bally’s Hotel, Las Vegas
10 AM – 10:45 AM
How to Select the Best Options in Bull and Bear Markets
Las Vegas Money Show
Bally’s/ Paris Hotel
12:15 – 3:15
This is a paid event hosted by The Money Show
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:
I’m only now getting involved with options…mostly because I saw you speak at the P.O.B. Public Library a while ago. I’m also currently reading your book “Complete Encyclopedia for Covered Call Writing”…which I find very well written…Clear and concise with just the right amount of humor.
Market tone (***starting in April, market tone information will be located on page 1 of premium member stock reports)
This week’s economic news of importance:
- Home builders’ index March 62 (62 last)
- Factory orders Jan. 0.1% (0.4% expected)
- Federal Reserve announcement No change in rates
- Weekly jobless claims 3/16 221,000 (225,000 expected)
- Philly Fed index March 13.7 (3.0 expected)
- Quarterly services survey Q4 1.2% (1.8% last)
- Leading economic indicators Feb. 0.2% (0.0% last)
- Markit manufacturing PMI March 52.5 (53.0 last)
- Markit services PMI March 54.8 (56.0 last)
- Existing home sales Feb. 5.51 million (5.12 million last)
- Wholesale inventories Jan. 1.2% (1.1% last)
- Federal budget Feb. -$234 billion (-$215 billion last)
THE WEEK AHEAD
Mon March 25th
- None scheduled
Tue March 26th
- Housing starts Feb.
- Building permits Feb.
- Case-Shiller home price index Jan.
- Consumer confidence index March
Wed March 27th
- Trade deficit Jan.
- Current account deficit Q4
Thu March 28th
- Weekly jobless claims 3/23
- GDP revision Q4
- Pending home sales Feb.
Fri March 29th
- Personal income Feb.
- Consumer spending Feb.
- Chicago PMI March
- New home sales Feb.
- Consumer sentiment index
For the week, the S&P 500 moved down by 0.77% for a year-to-date return of 11.72%
IBD: Uptrend under pressure
GMI: 6/6- Bullish signal since market close of January 31, 2019 as of Friday AM
BCI: I am favoring out-of-the-money strikes 3-to-2 compared to in-the-money strikes for new positions
WHAT THE BROAD MARKET INDICATORS (S&P 500 AND VIX) ARE TELLING US
The 6-month charts point to a slightly bearish market tone. In the past six months, the S&P 500 moved down 4% while the VIX (16.48) moved up by 35%.
Wishing you the best in investing,
Alan and the BCI team