Monday was a good day to be a stock picker. Shares of Red Robin Gourmet Burgers (RRGB) popped 13% after the stock was upgraded by Raymond James. Barnes & Noble (BKS), SodaStream (SODA) and China Distance Education Holdings (DL) were also big winners. Meanwhile, it was essentially a flat day for the broader market, with the Dow finishing up less than eight points ahead.
One factor that is weighing down a bit on the stock market is redemptions from mutual funds and ETFs. Last week, Citi Research reported that in the previous five trading days that $28.3 billion was redeemed from stock mutual funds and ETFs, of which, 95% came from the ETF industry. Some major tactical ETF managers, like Good Harbor, built massive cash positions at the start of February and The Wall Street Journal reported last week that these redemptions hit medium-sized companies the hardest a week ago today.
So the case for stock picking appears to be getting stronger. Now, I have nothing against indexing or tracking mutual funds. I was trained in indexing at Berkeley, but the only time to track indexes is when the market is in a low quality rally. The current market is obsessed with quality and it is getting narrower. There are fewer winners this year compared with last year, and there will be even fewer winners as the year goes on. This is not an environment suited to indexing, like it was in 2009 (when the market went higher on a lot of new volume) or in the first six months of 2013 (when we saw what I like to refer to as a “crap rally”).
The fact is that the market went to quality in the third quarter of 2013, and that has only picked up through the beginning of 2014. So it’s all the more important that we stick to the top stocks and not make any big sector bets. To get a pulse on the latest buying opportunities (and the stocks you should now avoid), let’s look at these stocks which have been upgraded and downgraded this weekend. Over the weekend I noticed 52 big-name stocks were on the move and have revised their ratings to reflect the latest data. Let’s take a look:
52 Recommendations Straight Out of Portfolio Grader
Upgrades
Last Week’s Holds, Now Buys
| Symbol | Company Name | Quantitative Grade | Fundamental Grade |
| ADM | Archer-Daniels-Midland | B | C |
| ADSK | Autodesk | B | B |
| AFL | Aflac | B | C |
| AKAM | Akamai Technologies | B | B |
| AV | Aviva plc Sponsored ADR | B | B |
| BBT | BB&T | B | C |
| CRM | salesforce.com, | B | C |
| DD | E. I. du Pont de Nemours | B | B |
| DG | Dollar General | B | B |
| MCO | Moody’s | A | B |
| MNST | Monster Beverage | B | C |
| RYAAY | Ryanair Holdings Plc Sponsored ADR | B | C |
| SBUX | Starbucks | B | C |
| SIAL | Sigma-Aldrich Corporation | B | B |
Last Week’s Sells, Now Holds
| Symbol | Company Name | Quantitative Grade | Fundamental Grade |
| ABB | ABB Ltd. Sponsored | D | C |
| AGN | Allergan | D | B |
| ALL | Allstate | C | C |
| BUD | Anheuser-Busch InBev | D | B |
| BXP | Boston Properties | D | C |
| HAL | Halliburton | D | C |
| HOT | Starwood Hotels & Resorts Worldwide | D | B |
| KMX | CarMax | D | C |
| LB | L Brands | C | C |
| LBTYA | Liberty Global Plc Class A | C | C |
| MON | Monsanto | D | C |
| NVO | Novo Nordisk A/S Sponsored ADR Class B | C | B |
| PAA | Plains All American Pipeline | D | C |
| SLF | Sun Life Financial | C | C |
| SNE | Sony Corporation | C | D |
| SWK | Stanley Black & Decker | D | C |
| TD | Toronto-Dominion Bank | C | C |
| TOT | Total SA Sponsored ADR Class B | C | C |
| TTM | Tata Motors Limited Sponsored ADR | D | B |
| UBS | UBS AG | D | C |
Downgrades
Last Week’s Buys, Now Holds
| Symbol | Company Name | Quantitative Grade | Fundamental Grade |
| CERN | Cerner | C | C |
| CHK | Chesapeake Energy | C | C |
| CHKP | Check Point Software Technologies | C | B |
| HCA | HCA Holdings | B | C |
| HRL | Hormel Foods | C | B |
| LNKD | C | D | |
| STX | Seagate Technology | C | C |
| TEVA | Teva Pharmaceutical | C | C |
| GLW | Corning | B | C |
Last Week’s Holds, Now Sells
| Symbol | Company Name | Quantitative Grade | Fundamental Grade |
| BK | Bank of New York Mellon | D | C |
| CNI | Canadian National Railway | D | C |
| CPB | Campbell Soup | D | C |
| DUK | Duke Energy | D | C |
| FDX | FedEx | D | C |
| KRFT | Kraft Foods Group | D | C |
| MJN | Mead Johnson Nutrition | D | B |
| MPC | Marathon Petroleum | D | B |
| SSL | Sasol Limited Sponsored ADR | D | C |
