Neglected Stock Effect
More than 1100 public companies that trade on the three major exchanges are not covered by Wall Street analysts (not including bulletin board stocks). This isnít because they are weak or bad companies; itís because analysts have been reducing their coverage since 2000, and many smaller or lesser known companies go unnoticed.
Companies in this "uncovered universe," as it is called, often benefit from an over-performance pattern known as the "
neglected stock effect
." This is based on a well-known Wall Street adage that says to buy a stock when the research on it is thin. The theory is that analyst coverage often inflates the price of a stock and that value still exists in companies flying under the analysts' radar.
Sabrientís Hidden Gems of mostly small and micro-cap stocks have outperformed comparable indices by a substantial margin over the past five years.
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