It’s almost impossible to find companies that fall into the first two categories (unless you’re trading on insider information), but investors willing to sift through volumes of data can find stocks that are more likely than others to see an upgrade.
The analyst community is funny in that they hate to be behind the rest of the crowd when it comes to performance … yet often are, and in turn have to play a game of ratings catch-up. As a result, if you can find the companies that are outperforming the market that are heavily ranked as “sells” by the analyst community, you’ve got a short list of stocks that are more likely to see upgrades — which in turn can provide boosts to the covered stocks.
To do this, we track the analyst buy/hold/sell ranking on more than 7,000 stocks every week, allowing us to form lists of the most adored and hated stocks on Wall Street. Over time, this has proved itself to be an incredibly valuable contrarian indicator — especially when you find stocks that the analyst crowd have totally missed out on, like the following three: