Shifts in analysts’ opinions show a bullish trend

What are we looking for?

Canadian stocks with the biggest changes in average analyst rating in the past month.

Tracking how analysts are raising or lowering investment recommendations provides a gauge of how momentum in opinion is shifting and can provide insight into the outlook for companies and industries.

The screen

We looked at common and preferred shares traded in Canada that are covered by at least five brokerages and have at least $5-million in average daily value traded. Those minimum values help to avoid the least-followed, least-liquid shares that could be difficult to trade. From an initial universe of more than 3,500 stocks, our criteria narrowed down the list to 174.

We then used Bloomberg's equity-screening function to identify the shares with the largest changes in average analyst rating in the past four weeks, and ranked them according to the biggest moves up and down.

More on the screen

Bloomberg tracks analysts' investment recommendations on a five-point scale, where "buy" and equivalents such as "outperform" or "overweight" are valued at five. "Sell" and equivalents are 1, and "neutral" is 3. New ratings and reinstated ratings are also counted, so the scale isn't simply a measure of upgrades and downgrades. The Bloomberg database doesn't include all ratings.

What did we find?

Upward moves in average ratings outnumbered downward moves. This suggests that in the past month analysts have been growing more bullish.

You can't, however, base an investing decision on analysts' ratings alone. Agnico-Eagle Mines Ltd., a gold producer, has an average rating of 4.1, which indicates analysts are rather optimistic. However, the shares plunged 18 per cent on Oct. 19 after the company halted some production because of flooding.