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Buy Ratings Highlight S&P 500 Winners in 2017

Earnings

By John Butters  |  December 15, 2017

At the end of last year (December 31, 2016), there were 11,418 ratings on stocks in the S&P 500. Of these 11,418 ratings, 48.5% were Buy ratings, 45.4% were Hold ratings, and 6.0% were Sell Ratings. How did analysts perform in terms of their ratings on S&P 500 companies in 2017?

Analyzing Performance 

To analyze the performance, we divided the stocks that were in the S&P 500 on December 31, 2016 into five equal-sized groups (quintiles) based on the percentage of Buy ratings at the start of the year (December 31, 2016). The 20% of S&P 500 companies with the highest percentage of Buy ratings were placed in the first group (Quintile 1). The 20% of S&P 500 companies with next highest percentage of Buy ratings were placed in the second group (Quintile 2). The 20% of S&P 500 companies with the lowest percentage of Buy ratings were placed in the last group (Quintile 5). We then looked at the average price return and median price return for each group from December 31, 2016 through December 13, 2017 to measure performance. For companies no longer traded publicly as of yesterday’s close, the last available trading price was used in the analysis when available.

For companies that no longer were traded publicly as of yesterday’s close, the last available trading price was used in the analysis when available

The quintile with the 20% of S&P 500 stocks with the highest percentage of Buy ratings (Quintile 1) at the start of the year has recorded the highest average price return (+19.7%) and the highest median price return (+23.1%) of the five quintiles. The average percentage of Buy ratings for a stock in this quintile was 78.3%, while the median percentage of Buy ratings for a stock in this quintile was 77.8%.

Of the stocks in this group, Micron Technology has been the top performer to date. From the start of the year through December 13, the stock price for Micron has increased by 91.8% (to $42.05 from $21.92). On December 31, 2016, 21 of the 27 ratings (78%) on Micron Technology were Buy ratings.

The average percentage of Buy ratings for a stock in this quintile was 78.3, while the median percentage of Buy ratings for a stock in this quintile was 77.8.

The quintile with the 20% of S&P 500 stocks with the lowest percentage of Buy ratings (Quintile 5) recorded the lowest average price return (+9.2%) and the lowest median price return (+7.0%) of the five quintiles. The average percentage of Buy ratings for a stock in this quintile was 14.9%, while the median percentage of Buy ratings for a stock in this quintile was 16.7%.

Of the stocks in this group, Southwestern Energy has been the weakest performer to date. From the start of the year through yesterday, the stock price for Southwestern Energy has decreased by 48.7% (to $5.55 from $10.82). On December 31, 2016, 8 of the 42 ratings (19%) on Southwestern Energy were Buy ratings.

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John Butters

Vice President, Senior Earnings Analyst, Investor Relations

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).

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