Should You Invest in New Gold (NGD) Based on Bullish Wall Street Views?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on New Gold (NGD), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank to make informed investment decisions [1][5]. Brokerage Recommendations for New Gold - New Gold has an average brokerage recommendation (ABR) of 1.56, indicating a position between Strong Buy and Buy, based on recommendations from nine brokerage firms [2]. - Among the nine recommendations, six are classified as Strong Buy and one as Buy, which accounts for 66.7% and 11.1% of all recommendations respectively [2]. Limitations of Brokerage Recommendations - Sole reliance on brokerage recommendations for investment decisions may not be wise, as studies indicate limited success in guiding investors towards stocks with the best price increase potential [5]. - Brokerage firms often exhibit a positive bias in their ratings due to vested interests, leading to a disproportionate number of favorable ratings compared to negative ones [6][11]. Zacks Rank as an Alternative - The Zacks Rank, which classifies stocks into five groups based on earnings estimate revisions, is presented as a more reliable indicator of near-term price performance compared to ABR [8][12]. - The Zacks Rank is timely and reflects the latest earnings estimate revisions, making it a better tool for predicting future stock prices [13]. Current Earnings Estimates for New Gold - The Zacks Consensus Estimate for New Gold has increased by 1.2% over the past month to $0.58, indicating growing optimism among analysts regarding the company's earnings prospects [14]. - This increase in consensus estimates, along with other factors, has resulted in a Zacks Rank of 2 (Buy) for New Gold, suggesting that the Buy-equivalent ABR may be a useful guide for investors [15].