Equity Moves on Sell-Side Sentiment for July 16, 2012

Research analysts may be alleged to play favorites with the big guns on Wall Street, but their equity ratings shift still leaves plenty of moves for the average trader on Main Street. Benzinga monitors equities that are subject to new bullish and bearish sell-side ratings daily, and today, their moves on the direction of those new ratings was a positive 1.86 percent (not equal-weighted). Twenty-nine stocks were subject to new bullish or bearish ratings. To reiterate, new bullish ratings are upgrades to, or initiations with a Buy, Overweight or Outperform rating. New bearish ratings are downgrades to, or initiations with, a Sell, Underweight or Underperform rating. A stock is said to move in-line with its new rating when it goes up following a bullish rating, or down following a bearish one. The largest move so far into the session was displayed by Alpha Natural Resources ANR, which was downgraded by BMO Capital Markets from Outperform to Underperform. Benzinga Professional reported the downgrade at 6:20 AM and followed with more analyst color here. ANR shares opened at $7.07 and moved to an intraday low at 12:25 PM. That three-hour move equaled 7.21 percent. In fact, all but one of the 29 equity issues relevant to our monitoring moved, albeit at lower extends to Alpha Natural Resources. All 29 averaged averaged +1.9 percent, on their most opportune levels after the open (intraday low for bearish ratings, intraday highs for bullish ratings). A composite where all these stocks were equal-weighted would have moved 1.87 percent. A more realistic indicator of this composite is the level where the price moves of these 29 stocks currently sit at, in relation to their respective rating. That level is a positive 0.62 percent, assuming equal-weighed trades - either long or short positions on each stock, depending on the new respective bullish or bearish rating. For an additional helping of reality, said stocks went, at varying times during the session, as low as 1.38 percent cumulatively against their ratings before falling back in line. Those inopportune moments come at intraday lows for new bullish ratings and intraday highs for bearish ones. Had stocks exited these respective levels, the an equally-weighted composite would have been down 1.28 percent. Merits of analyst action bias towards hedge funds notwithstanding, investors looking to capture modest but consistent profit opportunities should look at signals coming from the sell-side community.