3 Winning Stocks to Buy That Will Humble Wall Street Analysts

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stocks to buy - 3 Winning Stocks to Buy That Will Humble Wall Street Analysts

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Investors don’t like being wrong. That’s doubly true when they’re getting paid to make their recommendations. This is what makes tracking the activity of Wall Street stock analysts so interesting and attractive as an indicator when hunting down stocks to buy.

3 Winning Stocks to Buy That Will Humble Wall Street Analysts

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Historically, our research shows any stocks that are more widely recommended as buy recommendations by Wall Street track even with the market. That makes sense, if you think about it. They’re often considered “crowded trades,” which means there’s less potential for new money to come rushing in to make their prices go higher.

So, how does this data get used as an indicator?

Our research also shows stocks that have outperformed the market and are underloved by Wall Street analysts (in other words, few buy recommendations despite performance that deserves respect) tend to outperform the S&P 500. These are the stocks to buy at any given time. But why does this happen? It’s mostly because analysts have to “catch up” to these stocks’ performance — so they don’t look like they’ve missed the ball, even though they have — by issuing upgrades. And those drive even more buying.

Using our database models, we’ve compared the performance of all 500 stocks in the S&P 500 Index with their current analyst rankings to identify a short list of stocks to buy because of their status as “underloved outperformers.” We believe each of these stocks will see upgrades in the near future, and thus have a high likelihood of being pushed even higher.

Winning Stocks to Buy: CSX (CSX)

CSX stock chartPotential Upside: 15%

Since its last earnings report, railroad operator CSX Corporation (NASDAQ:CSX) has been on a tear.

The company had a sluggish Q4 earnings report. However, the potential for a shakeup — namely, pressure to install veteran railroad chief Hunter Harrison on CSX’s management team, which eventually happened in March when he was named CEO — and an announced round of layoffs helped send the stock soaring.

More than a month later, CSX shares are still considered a leader in the transportation sector, even though the stock has spent much of that time consolidating just below $50.

A robust market rally — like the one in 2017, which is expected to continue — is almost always led higher by the transportation index. The basic concept behind this is that a growing economy drives more shipping activity which benefits the rail, trucking and airline companies.

Looking at the S&P 500’s stocks, CSX is the top performing company over the past six months. Shares have returned 63% over that time frame against the index’s 10% gains.

Despite 6x outperformance, analysts still remain cool. Only 42% of those covering CSX have it ranked a buy, which means a number of analysts have been on the platform while this stock has pulled out of the station.

Expect analyst upgrades to help power CSX stock to the $55 level.

Winning Stocks to Buy: Alcoa (AA)

Winning Stocks to Buy: Alcoa (AA)Potential Upside: 15%

Basic materials companies have also played a leadership role in the rally. This is because infrastructure rebuilding is at the core of potential economic development for the next few years.

Alcoa Corp (NYSE:AA) has found itself in a technical sweet spot as the company has crossed into a technical bull market while garnering little respect from the analyst community.

Shares of Alcoa have gained 61% over the last six months, outperforming the S&P 500 by more than six times. Despite the outrageous performance, only 38% of the analysts tracking AA stock have it ranked a buy. Ironically, the same percentage (38%) have it ranked a sell.

It’s only a matter of time before those in the sell category are almost forced to upgrade the shares of Alcoa, helping to drive prices even higher.

Our models target a move back to $40 for this basic material giant.

Winning Stocks to Buy: Netflix (NFLX)

Winning Stocks to Buy: Netflix (NFLX)Potential Upside: 14%

That’s right. Netflix, Inc. (NASDAQ:NFLX) is among the lesser-liked companies that have outperformed the S&P 500. The analyst community is certainly disrespecting NFLX, considering just 55% of the pros have it ranked a buy despite 46% gains in the past six months.

Let’s put it into perspective.

Facebook Inc (NASDAQ:FB) shares have gained a somewhat respectable 8% over the past six months. This return is less than the S&P 500’s and far from Netflix’s performance for the same period. Despite that, 91% of the analysts tracking Facebook have it ranked a buy. None of them view it as a sell.

Given the international expansion and the prior quarter’s earnings report, it’s only a matter of time before the analysts start moving into the buy category with upgrades. We expect those upgrades to move NFLX shares higher. Currently, our models target a move to as high as $165 on analyst upgrade activity.

As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/3-winning-stocks-to-buy-humble-wall-street-stock-analysts/.

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