We’re in the process of updating a report we publish for clients a few times a year looking at the most loved and hated stocks by Wall Street analysts. In the report, we also provide an analysis of analyst ratings at the sector and market cap level. Taking a view from the top, below is a look at how many analyst ratings there are per stock for large caps, mid caps, and small caps.
The S&P 1500 index is made up of the S&P 500 (large caps), the Mid Cap 400 (mid-caps), and the Small Cap 600 (small caps). For the entire S&P 1500, there are 18,945 analyst recommendations, which equates to 12.6 analyst ratings per stock. But analyst coverage varies widely by market cap. Predictably, the largest stocks in the market have the most analyst coverage, while the smallest stocks have the least amount of coverage. In the S&P 500, there are 21.2 analyst ratings per stock. For mid caps, there are 11.5 analyst ratings per stock, and for small caps, there are just 6.2 analyst ratings per stock.
In terms of finding stocks that are going to outperform, there’s a reason why investors gravitate towards the small-cap space. With fewer analysts covering small caps, there’s a better chance at finding stocks that are either undervalued or overvalued. The more eyes there are watching a stock (or group, sector, index, or country), the higher the likelihood that the “efficient market hypothesis” is at work.
On another note, we also wanted to quickly touch on analyst sentiment without diving too deep. (We’re saving that for our premium report.) Right now, 49.8% of all analyst ratings are “Buy” ratings. As shown below, at the start of the year, 47.2% of all ratings were “Buy” ratings, so analysts have gotten more bullish as the year has progressed.