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Number Cruncher

Most popular stocks: the analyst edition Add to ...

What are we looking for?

The most popular stocks in Canada. There could be a number of ways to try to measure this, such as finding stocks that are the most widely held, those garnering the most positive press coverage, or trending the most in social media. But to crown the winners of our popularity contest today, we’re going to take a fresh approach that focuses on two variables: the number of sell-side analysts who cover a stock, and those companies that have seen the greatest percentage change in earnings estimate revisions for the current year over the past 28 days.

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Of course, stocks that have the most analyst coverage don’t make them instant buys. But keep in mind that the buy side of the trade – namely institutional investors – still rely on these equity research analysts who evaluate companies for future earnings growth and other investment criteria. If a stock is widely covered by sell-side analysts, large fund managers are more likely to load up on the name.

More on today’s screen

To meet our criteria, companies had to be in the top 10 per cent of firms for both the number of sell-side recommendations and the percentage change in earnings estimate revisions. Bloomberg, which supplied the data and the idea for this screen, then weighted them equally into a single score. In theory, the higher the number, the better.

What we found

A dozen stocks – all in the energy sector. And the company with the highest ranking is also by far the largest by assets and market capitalization: Imperial Oil Ltd.

Analysts overall aren’t super bullish on Imperial Oil’s prospects: There are only four buy ratings compared with 10 holds and two sells, according to Bloomberg data. The average price target, of $50.39, also only suggests limited upside and is modestly below its 52-week high of $54.

But the company is making tons of money. In its fourth-quarter results Tuesday, net income rose 26 per cent from a year ago to just over $1-billion, well above Street expectations. With the help of strong refining margins, Imperial boasted full-year profits of $3.37-billion, up more than 50 per cent from 2010 and its second-best return ever. Some analysts have raised their price targets in the wake of the earnings.

Oil prices have held relatively steady of late but tension with Iran and its threat of blocking the Strait of Hormuz has the market on edge. Meanwhile, natural gas prices are striking fresh 10-year lows and few are expecting a quick turnaround. The uncertainty may be creating a lot of revisions in earnings estimates and keeping the sector at the forefront of attention among fund managers.

Anybody who went through public high school knows that popularity often doesn’t translate into future riches. But this screen suggests energy stocks are grabbing a lot of attention in professional money management circles right now, setting up as interesting market plays.

Follow on Twitter: @eyeonequities

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