Should You Invest in AngloGold Ashanti (AU) Based on Bullish Wall Street Views?

Investors often turn to recommendations made by Wall Street analysts before making a Buy, Sell, or Hold decision about a stock. While media reports about rating changes by these brokerage-firm employed (or sell-side) analysts often affect a stock's price, do they really matter?Let's take a look at what these Wall Street heavyweights have to say about AngloGold Ashanti (AU) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.AngloGold Ashanti currently has an average brokerage recommendation (ABR) of 2.00, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by six brokerage firms. An ABR of 2.00 indicates Buy.Of the six recommendations that derive the current ABR, three are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 50% and 16.7% of all recommendations.Brokerage Recommendation Trends for AUCheck price target & stock forecast for AngloGold Ashanti here>>>While the ABR calls for buying AngloGold Ashanti, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.Do you wonder why? As a result of the vested interest of brokerage firms in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms assign five "Strong Buy" recommendations for every "Strong Sell" recommendation.This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is an effective indicator of a stock's price performance in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.Zacks Rank Should Not Be Confused With ABRIn spite of the fact that Zacks Rank and ABR both appear on a scale from 1 to 5, they are two completely different measures.Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers -- 1 to 5.Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.Furthermore, the different grades of the Zacks Rank are applied proportionately across all stocks for which brokerage analysts provide earnings estimates for the current year. In other words, at all times, this tool maintains a balance among the five ranks it assigns.Another key difference between the ABR and Zacks Rank is freshness. The ABR is not necessarily up-to-date when you look at it. But, since brokerage analysts keep revising their earnings estimates to account for a company's changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in indicating future price movements.Is AU Worth Investing In?In terms of earnings estimate revisions for AngloGold Ashanti, the Zacks Consensus Estimate for the current year has increased 13.9% over the past month to $4.91.Analysts' growing optimism over the company's earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher, could be a legitimate reason for the stock to soar in the near term.The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #1 (Strong Buy) for AngloGold Ashanti. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>Therefore, the Buy-equivalent ABR for AngloGold Ashanti may serve as a useful guide for investors.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AngloGold Ashanti PLC (AU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks