What are we looking for?
Most brokerage firms highlight their top stock picks from time to time. It's a way to promote themselves and generate interest in specific stocks. Today, we'll be looking at National Bank Financial's "Action List."
What's an action list?
The list highlights NBF analysts' "most compelling investment ideas."
The rules for admittance are straightforward. Each analyst can have up to 10 per cent of his or her coverage universe on the list at any one time. There are no market cap or liquidity restrictions.
"Some of the best returns can come from small and mid-cap stocks. As such, we want to ensure they are included on the Action List when appropriate," National Bank Financial said.
"We do not require that an analyst always have a name on the action list," the brokerage added. "This way we can ensure that only the most compelling ideas are presented."
Bullish or bearish?
Analysts are free to recommend any stock on which they have a strong opinion, whether bullish or bearish. However, the current list consists of only stocks that analysts rank as "outperform," which National Bank Financial defines as follows: "The stock is expected to outperform the analyst's coverage universe over the next 12 months."
Not the last word
Remember that a brokerage opinion on a stock is just one piece of information you should use to evaluate a company. Also be aware that the broker may have an investment banking or lending relationship with the company it recommends (see the table for further information).