When investors are hunting for stocks to buy, sell, or hold, the lure of Wall Street’s siren call can be hard to resist. Raid Dazed, analysts from brokerage firms seem to wield significant influence over stock prices, but should you heed their song?
According to Wall Street’s financial finger-waggers, Energy Transfer LP (ET) currently boasts an average brokerage recommendation (ABR) of 1.25, floating around the land of ‘Strong Buy’. This rating is the result of 12 brokerage firms offering their two cents – 10 shouting ‘Strong Buy’ and one squeaking ‘Buy’ – contributing to a chorus of 83.3% and 8.3%, respectively.
The Temperamental ABR
But here’s the rub – Wall Street’s crystal ball often develops cracks when it comes to predicting stock performances. Studies reveal that brokerage recommendations are about as reliable as a palm reader at a county fair when it comes to foreseeing stock price movements. Why? You ask? Because the brokerage firms often have skin in the game, leading to overly optimistic ratings that are about as trustworthy as a fox guarding the henhouse.
Zacks Rank – The Knight in Shining Armor?
With the Zacks Rank, we encounter a gallant knight riding in to save the day. This trusty steed gives us a clear view of a stock’s potential performance, unswayed by the temptations and trickeries of brokerage firms. The Zacks Rank, guided by earnings estimate revisions, offers a more reliable indicator of a stock’s near-term price performance.
ABR vs. Zacks Rank – Know Thy Difference
The ABR and the Zacks Rank may seem like two birds of a feather, but they are as different as a cat and a sheep. While the ABR is based solely on brokerage recommendations, the Zacks Rank is rooted in quantitative analysis, specifically earnings estimate revisions, and is displayed in whole numbers from 1 to 5.
So, why pledge allegiance to the Zacks Rank? Well, because the Zacks Rank isn’t last year’s news when you’re still in January. It’s fresh, hot off the press, always keeping up with the latest changes in analysts’ estimates to ensure timely and accurate indications of future price movements
Is ET Worthy?
At first glance, ET seems to hover in the middle ground, with a consensus estimate holding steady at $1.09. This, along with other factors, has led to a Zacks Rank #3 (Hold) for ET. So, while Wall Street’s painted picture may seem rosy, it might be wise to tread lightly on the petals of this stock.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.0% per year. So be sure to give these hand-picked 7 your immediate attention.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.