Monthly Broker Recommendations: Which sectors are they watching and why?

Since we started performance-tracking stock tips on our platform, Stockomendation has captured over 14,000 individual broker ratings. From this, we can draw inferences from broker activity and identify companies and sectors that are busier than we’d typically expect. Out of curiosity, we ran some analysis this week using data from January 2015 to June 2018, to see which sectors receive a higher than average number of recommendations for each month in the year. Our research produced some interesting, and unexpected, finds.

Sectors with the Highest Proportion of Monthly Broker Recommendation vs Average

Firstly, the sector with the largest increase in number of recommendations (compared to the average) changes on a monthly basis, with no one sector featuring in any two months. This may be due to the nature of announcement dates, and industry-specific events (for example, Secondly, sectors with the highest number of tips since January 2015 – for example, Tourism and Leisure and Retail – receive fairly consistent coverage from brokers throughout the year, and so do not feature amongst the highest monthly increases in broker activity during any particular month.

Given that there are usually ‘key’ periods in both the Tourism and Retail industries, such as the festive reporting season in January, this is something of a surprise. However, there are a couple of explanations here; whereas some sectors tend to see company reporting dates roughly within the same period, the variation in announcement dates is higher in others – which may influence the concentration in tips within certain sectors on a given month. Also, within the UK retail sector especially, the demise of a number of the sector in general within recent years has also received heavy year-round coverage.

Instead, it is Energy Producers that feature highest in January, with over 55% more recommendations than the average amount. This has be partly attributed to announcements by intergovernmental body OPEC, and widespread media coverage of falling oil prices during January 2015 and 2016. More recently, concerns over the future of the Iran nuclear deal in January this year, and associated sanctions on Oil and Banking may have had an impact. Unsurprisingly, Construction firms receive a higher number of tips than usual in March, coinciding with full-year earnings from some of the largest UK construction firms, including Balfour Beattie (14th March), while firms operating within different aspects of finance and technology typically dominate the later months of the year. While the number of recommendations in the closing weeks of the year tends to be considerably lower than usual, the Support sector tend to receive a greater proportion of those tips.

The reasons for such increases in broker recommendations can be attributed to a number of factors, such as earnings and dividend announcements. Alternatively, individual brokers and research houses may conduct periodical ‘sector reviews’ at certain points during the year. However, in some cases they may hold a strong belief about the prospects of a particular sector, and upgrade (or downgrade) a number of companies in the same sector as a result. That’s where the ability to track current trends, and the consensus sentiment of brokers, comes in handy. Stockomendation allows you to keep ahead of the curve by monitoring trending companies and sectors over the last seven days, and view consensus sentiment from all open tips for a particular company or sector. What’s better, you can access these tools, and check out over 37,000 tipster and broker recommendations on our platform, for FREE.

Disclaimer: The contents of this article should not be considered financial advice.