A study of analyst recommendations at the major brokerages shows that Verizon Communications Inc (VZ) is the #5 broker pick, on average, out of the 30 stocks making up the Dow Jones Industrial Average, according to ETF Channel. Verizon Communications Inc also comes in above the median of analyst picks among the broader S&P 500 index components, claiming the #76 spot out of 500.
In forming this rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the underlying components were ranked according to those averages. Investors often interpret analyst opinions from different angles — a popular analyst pick could mean that many sharp minds individually came to the same bullish conclusion, and therefore the stock should do well, but it could also mean that if the company stumbles, that would come as a negative surprise.
From the other direction, when companies have a low rank among analysts, it isn't necessarily the case that investors should conclude that the stock will perform poorly. It can, of course, but a bullish investor could also take the contrarian angle and read into the data that there is lots of room for upside because the stock is so out of favor.For these reasons, we at ETF Channel find value to putting together these rankings, because both the top and the bottom ends of the lists can often make for some interesting stock picking ideas for further research. Below is a chart of rank over time:
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