Cel Sci Corporation (CVM)

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Why No Analyst Coverage on CVM?

I have talked to some other posters about why we don't have any other analyst coverage for CVM besides Zacks, which is paid for by CVM by the way. It hasn't sat well with us. It has given us reservations. Why, so far into our study and with things looking seemingly good do we not have any other analysts initiating coverage on our good little company? It gives us pause. Do they know something we don't? So I did a little bit of research. Here is what I found. Hint, it is seemingly positive.

Link: https://www.theglobeandmail.com/globe-investor/a-stock-with-no-analysts-can-bring-big-rewards-risks/article26909894/

"As a general rule, a company covered by lots of analysts will tend to be very fairly valued, with little upside beyond the overall market's move," he says. "So if you're going to be a do-it-yourself investor looking for big gains, you need to look for gems that are covered by few or no analysts."

If a company has earnings, a good balance sheet and is trading at a reasonable price but has no analyst coverage, the odds are that it's cheap," he says. "Analysts can easily be wrong, and sometimes get too close to management and can be prone to 'groupthink,'" he says.

He also notes it can be more difficult for companies without analyst coverage to get their stories out when things are going well. While the returns on investments in overlooked companies can be large, there are certainly significant risks. Stocks that don't have analyst coverage can stay overlooked for quite some time – especially by institutional investors whose buying has the greatest impact on stock prices.

Some observers feel the investment dealers have other motives for their coverage decisions. Since the most profitable part of their business is investment banking (helping companies go public, issue more stock and make acquisitions), there is a possible incentive to offer companies favourable analyst coverage in return for investment banking business. "Analysts cover companies that need financing because ultimately a dealer earns money raising money for companies," says Mr. Taylor. "But the best companies don't need money. They generate enough cash to fund their stocks." Mr. Gallander has the same suspicion. "They often choose companies that generate fees for them," he says. "That makes them less than impartial."

Ultimately, whether a company is covered by analysts or not, the best rule for investors is to rely on their own research. "It really helps if people can understand financial statements and financial ratios," says Mr. Gallander. "Do a ton of reading and analysis.Going to annual company meetings and getting a better feel for the company's management can also be extremely helpful. As well, sticking to sectors that are easy to understand or you have some expertise in can help you with your research.

Link: [/size]https://www.zacks.com/education/articles.php?id=57

According to Multex, there were 8,911 companies traded on U.S. markets last year. Roughly 3,100 of those companies, or about 35%, are followed by at least one analyst. In other words, 65% of publicly traded companies in the U.S. are not followed by a single analyst. With that many uncovered stocks, you can bet there are many neglected ones out there. So how does one measure the “neglect-factor” of a stock?

This brings us to the question of why greater analyst coverage is good for a neglected stock. The reason is simply that not enough managers are aware the stock even exists to cause the stock’s price to accurately reflect the true earnings potential of the company. Increasing analyst coverage is great because analysts almost always initiate coverage with a positive recommendation. This makes sense because there isn’t much point in writing a research report on an obscure company if it is a dog.

Analysts neglect stocks for a variety of reasons, but the main one is that there are no banking fees at stake. A little, unknown stock is much less likely to price a secondary offering or announce a merger than some blue chip such as General Electric. As we all know, financial companies are in it to make money as well, and there is not too much money to be made by covering obscure stocks that won’t generate much revenue for the analyst’s firm.