The SPDR S & P 500 has a 13% increase

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The financial media love to get expert predictions about the direction that the S & P 500 index is taking. Some experts are looking at technical analysis models, others about the indicators of valuation, others apply a global macroeconomic vision of the economy. In this article, we present another forward-looking approach that may be of interest to investors. The S & P 500 is actually a collection of five hundred individual actions, each with a specified weighting applied to the total. For each of these actions, all the major brokerages ask their best analysts to study the company in depth and then set a price target at 12 months. By taking all the different price targets of all major analysts, we can then calculate an average target for this stock. In a sense, this average target represents a "wisdom of the crowds" effort, because so many individual minds have contributed to the ultimate number as opposed to what one particular expert believes.

But we can go a step further, comparing the current stock price to the average analyst target, to determine the upside potential that exists if the average target price is reached, and we can perform the same exercise for each component. Here at ETF Channel, we performed this exercise for all individual components of the SPDR S & P 500 ETF, and weighted the results to determine the average implied target for the ETF as an analyst. With respect to the SPDR S & P 500 ETF, we found that the analyst's implicit target price for the ETF, calculated on the basis of its underlying holdings, was $ 316.02 per unit.

As SPY is trading at a recent price close to $ 280.42 per unit, this means that analysts are banking on a potential upside of 12.69% for this ETF, thus meeting analysts' average target targets for holdings. underlying. Three of the underlying holdings of SPY that have a significant advantage over analysts' target prices are W.W. Grainger, Allegion and Snap-On. Although GWW traded at a recent price of 279.34 USD / share, the average analyst target is 22.11% higher at 341.10 USD / share. Similarly, ALLE is up 14.45% from the recent price of $ 84.17 if the average target price of $ 96.33 per analyst is reached, and analysts expect on average that the SCN reaches a target price of $ 191.50 / share, which is 14.28% higher than the recent price of $ 167.57.

Below is a summary table of current target prices for analysts:

Are the analysts justified in these objectives or too optimistic as to where these securities will be traded in 12 months? Do analysts have a valid rationale for their goals or lag behind recent developments in business and industry? A high price target relative to the stock price of a stock may reflect optimism about the future, but may also be a forerunner of downward price revision if goal was a relic of the past. These are questions that require additional research from investors.

Click here to discover 10 ETFs with the most favorable objectives for analysts »

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The financial media love to get expert predictions about the direction that the S & P 500 index is taking. Some experts are looking at technical analysis models, others about the indicators of valuation, others apply a global macroeconomic vision of the economy. In this article, we present another forward-looking approach that may be of interest to investors. The S & P 500 is actually a collection of five hundred individual actions, each with a specified weighting applied to the total. For each of these actions, all the major brokerages ask their best analysts to study the company in depth and then set a price target at 12 months. By taking all the different price targets of all major analysts, we can then calculate an average target for this stock. In a sense, this average target represents a "wisdom of the crowds" effort, because so many individual minds have contributed to the ultimate number as opposed to what one particular expert believes.

But we can go a step further, comparing the current stock price to the average analyst target, to determine the upside potential that exists if the average target price is reached, and we can perform the same exercise for each component. Here at ETF Channel, we performed this exercise for all individual components of the SPDR S & P 500 ETF, and weighted the results to determine the average implied target for the ETF as an analyst. With respect to the SPDR S & P 500 ETF, we found that the analyst's implicit target price for the ETF, calculated on the basis of its underlying holdings, was $ 316.02 per unit.

As SPY is trading at a recent price close to $ 280.42 per unit, this means that analysts are banking on a potential upside of 12.69% for this ETF, thus meeting analysts' average target targets for holdings. underlying. Three of the underlying holdings of SPY that have a significant advantage over analysts' target prices are W.W. Grainger, Allegion and Snap-On. Although GWW traded at a recent price of 279.34 USD / share, the average analyst target is 22.11% higher at 341.10 USD / share. Similarly, ALLE is up 14.45% from the recent price of $ 84.17 if the average target price of $ 96.33 per analyst is reached, and analysts expect on average that the SCN reaches a target price of $ 191.50 / share, which is 14.28% higher than the recent price of $ 167.57.

Below is a summary table of current target prices for analysts:

Are the analysts justified in these objectives or too optimistic as to where these securities will be traded in 12 months? Do analysts have a valid rationale for their goals or lag behind recent developments in business and industry? A high price target relative to the stock price of a stock may reflect optimism about the future, but may also be a forerunner of downward price revision if goal was a relic of the past. These are questions that require additional research from investors.

Click here to discover 10 ETFs with the most favorable objectives for analysts »