Despite higher inflation, rising interest rates, military conflict in Ukraine, and a resurgence of COVID-19 in China, analysts have more Buy ratings on stocks in the S&P 500 as a percentage of their total ratings in more than 10 years.
Share of Buy Ratings Remains Above 55%
On March 31, there were 10,821 ratings on stocks in the S&P 500. Of these ratings, 57.3% were Buy ratings, 37.1% were Hold ratings, and 5.6% were Sell ratings. Over the past five years, the average (month-end) percentage of Buy ratings is 52.9%, the average (month-end) percentage of Hold ratings is 41.1%, and the average (month-end) percentage of Sell ratings is 6.0%.
The month of March marked the second highest (month-end) percentage of Buy ratings for the index going back to at least 2010, trailing only the previous month (February) at 57.4%. Prior to the recent surge in Buy ratings, the last time the percentage of Buy ratings exceeded 55% at the end of a month was September 2011 (55.8%).
At the sector level, analysts are most optimistic on the Energy (66%), Information Technology (64%), and Communication Services (62%) sectors, as these three sectors had the highest percentages of Buy ratings on March 31. On the other hand, analysts are most pessimistic on the Consumer Staples (41%) and Utilities (49%) sectors, as these two sectors had the lowest percentage of Buy ratings on March 31. The Consumer Staples sector also had the highest percentage of Hold ratings (48%) and the highest percentage of Sell ratings (11%) on this date.
The S&P 500 companies with the highest percentages of Buy and Sell ratings on March 31 are listed in the tables below.
Highest % of Buy Ratings in S&P 500: Top 10 (Source: FactSet)
Alexandria Real Estate Equities, Inc.
Alphabet Inc. Class C
Alphabet Inc. Class A
IQVIA Holdings Inc
Caesars Entertainment Inc
Alaska Air Group, Inc.
Highest % of Sell Ratings in S&P 500: Top 10 (Source: FactSet)
Consolidated Edison, Inc.
Pinnacle West Capital Corporation
Lumen Technologies, Inc.
Robert Half International Inc.
Church & Dwight Co., Inc.
Expeditors Intl. of Washington, Inc.
McCormick & Company, Incorporated
Optimistic Target Price Estimates
Analysts are also optimistic in their target price estimates, as they currently believe the price of the index will increase by more than 16% (to 5282.93) over the next 12 months. For more details, please refer to our recent article on this topic.
What is driving the optimistic outlook in terms of ratings and target prices? One likely reason is that analysts have been increasing earnings estimates for S&P 500 companies in aggregate for CY 2022 and CY 2023 for several months. For more details, please refer to this recent article.
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Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).
The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.