Brokers Recommend Reading This Before Betting on Agnc Investments (Agnc)


Dec 30, 2023
Brokers Recommend Reading This Before Betting on Agnc Investments (Agnc):

Investors frequently rely on Wall Street analysts’ recommendations when determining whether to purchase, sell, or hold a stock. A stock’s price is frequently impacted by media reports about these sell-side analysts, who work for brokerage firms, changing their ratings. But do they matter?

Before we talk about how to take advantage of brokerage recommendations and their dependability, let’s see what these influential Wall Street figures have to say about AGNC Investment (AGNC).

Based on the actual buy, hold, sell, and other recommendations made by ten brokerage firms, AGNC Investment currently has an average brokerage recommendation (ABR) of 2.00 on a scale from 1 to 5 (Strong Buy to Strong Sell). ABR values of 2.00 denote a buy.

Four are Strong Buys and two are Buys out of the ten recommendations that are derived from the current ABR. 20% and 40% of all recommendations are classified as Buy and Strong Buy, respectively.

The ABR advises purchasing AGNC Investment, but it might not be a good idea to base your investment decision only on this information. Numerous studies have shown that brokerage recommendations are ineffective at helping investors select stocks with the highest potential for price growth.

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Do you want to know why? Brokerage firms’ vested interest in a stock they cover frequently causes their analysts to rate it with a strong positive bias. According to our research, brokerage firms assign five “Strong Buy” recommendations for every “Strong Sell” recommendation.

Put differently, their objectives don’t always coincide with those of regular investors, and they hardly ever predict where a stock’s price might go. Consequently, the most beneficial application of this data may be to corroborate findings from your studies or an indicator that has a track record of accurately predicting changes in stock prices.

Our proprietary stock rating tool, the Zacks Rank, has an impressive external audit track record and reliably predicts a stock’s near-term price performance. It divides stocks into five groups, with Zacks Rank #1 (Strong Buy) and Zacks Rank #5 (Strong Sell). Making a profitable investment decision could therefore be greatly aided by verifying the Zacks Rank using ABR.

You Shouldn’t Mix Up ABR And Zacks Rank

Zacks Rank and ABR are two distinct metrics even though they are both presented on a scale of 1 to 5.

The ABR is computed solely from broker recommendations and is usually shown as a decimal (e.g., 1.28). In contrast, the Zacks Rank is a quantitative model that leverages the impact of revisions to earnings estimates. Whole numbers are shown, ranging from 1 to 5.

Brokerage firm analysts have historically and presently overestimated the potential of their recommendations. These analysts mislead investors far more often than they assist them because of the vested interests of their employers, which motivates them to issue more favorable ratings than their research would support.

You Shouldn't Mix Up ABR And Zacks Rank

Zacks Rank, on the other hand, is influenced by revisions to earnings estimates. Furthermore, empirical research indicates a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

Additionally, all stocks for which brokerage analysts provide current-year earnings estimates receive a proportionate application of the various Zacks Rank grades. Stated differently, this tool consistently upholds equilibrium among its five ranks.

Freshness is another important distinction between Zacks Rank and the ABR. When you look at the ABR, it may not be current. However, because the Zacks Rank reflects brokerage analysts’ actions quickly enough and they constantly update their earnings estimates to reflect a company’s shifting business trends, the Zacks Rank is always timely in predicting future price movements.

Is AGNC a Good Investment?

In light of AGNC Investment’s earnings estimate revisions, the Zacks Consensus Estimate for the current year has stayed steady at $2.52 over the previous month.

An unchanging consensus estimate suggests that analysts’ stable opinions about the company’s earnings prospects may be a valid explanation for the stock’s near-term market-beating performance.

AGNC Investment currently has a Zacks Rank #3 (Hold) due to the magnitude of the most recent shift in the consensus estimate and three other aspects of earnings estimates. The whole list of today’s Zacks Rank #1 (Strong Buy) stocks can be found here >>>>.

For this reason, it could be wise to proceed with some caution when using the Buy-equivalent ABR for AGNC Investment.

By lima

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