Clearway Energy (CWEN) Is Considered a Good Investment by Brokers: Is That True?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Clearway Energy (CWEN), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank. Group 1: Brokerage Recommendations - Clearway Energy has an average brokerage recommendation (ABR) of 1.33, indicating a consensus between Strong Buy and Buy based on 12 brokerage firms' recommendations, with 10 out of 12 being Strong Buy, representing 83.3% [2] - Despite the positive ABR, the article cautions against making investment decisions solely based on this metric, as studies show limited success of brokerage recommendations in predicting stock price increases [5][10] - The vested interests of brokerage firms often lead to a bias in their analysts' ratings, with a tendency to issue five "Strong Buy" recommendations for every "Strong Sell" [6][10] Group 2: Zacks Rank vs. ABR - The Zacks Rank is presented as a more reliable indicator of a stock's near-term price performance, based on earnings estimate revisions, and is classified into five groups from Strong Buy to Strong Sell [8][11] - The Zacks Rank is updated more frequently than the ABR, as it reflects real-time changes in earnings estimates, making it a timely tool for predicting future stock prices [12] - Clearway Energy currently holds a Zacks Rank of 4 (Sell) due to a 12.9% decline in the Zacks Consensus Estimate for the current year, indicating growing pessimism among analysts regarding the company's earnings prospects [13][14]