Why female analysts are bolder and more accurate

Next time you follow an analyst recommendation, you may want to check if the analyst is male or female.

A study published in the Journal of Accounting Research shows that female analysts issue bolder and more accurate forecasts than their male counterparts.

The author, Dr Alok Kumar, came to this conclusion after examining over 2 million stock forecasts made by 17,240 analysts covering a total of 13,636 stocks. Kumar identified the gender of analysts using their full names.

However, these findings have nothing to do with the natural investing ability of men vs women. Multiple studies show that female investors are actually more risk-averse and less competitive in their investing behavior than men.

A ‘self-selecting’ group of out-performers

The answer lies in the fact that the financial services industry remains a very male-dominated profession. Over the entire 1983 to 2005 sample period, Kumar found that there were only about 16 percent female analysts. This number peaked in 2001 at just 20 percent.

This simple fact leads Kumar to the crux of the study:

“Overall, due to a self-selection process, only women with above average abilities would choose the analyst profession and, consequently on average, female analysts are likely to be more skillful than male analysts.”

These are women who actively choose to pursue a career in the highly competitive, male-dominated financial services industry. Meanwhile their ‘superior forecasting abilities’ allow them to compete more effectively with male analysts.

Top female analysts and their latest stock recommendations

In light of the above, we decided to identify the Street’s best female analysts and some of the stocks they like right now.

TipRanks uses a natural language processing algorithm to rank over 4,700 analysts based on two factors 1) average return and 2) success rate of their buy-sell recommendations.

These 5 female analysts are all in the Top 25 for the sector they cover, so let’s take a closer look now :

Helane Becker, Cowen & Co, services analyst

One of Becker’s most recent top picks is Southwest Airlines (NYSE:LUV) which she believes has 15% upside potential. “Southwest has a good balance sheet, it delivers a good product to customers, particularly leisure customers, (and) they pay a dividend and buy back stock,” Becker recently told Forbes. Bear in mind you can click on the analyst picture for further insights into their most recent stock ratings and price targets.

Ritu Baral, Cowen & Co, healthcare analyst

Baral’s favorite stocks right now include SAGE Therapeutics (NASDAQ:SAGE); Cytokinetics Inc (NASDAQ:CYTK); and Intercept Pharma (NASDAQ:ICPT). She sees SAGE (a biopharma focused on central nervous system disorders) soaring by almost 16% in the coming months.

Collyn Gilbert, KBW, financial analyst

Gilbert is bullish on Bankwell Financial Group (NASDAQ:BWFG) and United Financial Bancorp (NASDAQ:UBNK). “I’m a ‘permabear’,” Gilbert said recently. “But that being said, I’m the most optimistic as I’ve been in a while.” She believes that ROAs (return on assets) will finally improve, boosted by both tax reform and rising rates.

Laura Martin, Needham, services analyst

Martin’s recent top stock picks include Roku Inc (NASDAQ:ROKU); Apple Inc (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). Martin says if you invest in Netflix, you may as well own Roku, because it’s “valued at a steep discount to Netflix, despite comparable growth credentials, a better margin profile, lower content risks, and little competitive threat from new OTT channel launches.” Her $50 price target suggests 30% upside potential from the current share price.

Savanthi Syth, Raymond James, services analyst

Syth tells investors to expect sustainable profitability and more upside in the airline space. Right now, her favorite stock is Alaska Air (NYSE:ALK). She says the company is starting to execute and can hit $85 (32% upside potential).

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