In a study of analyst recommendations at the major brokerages for the underlying components of the S&P 500, BorgWarner Inc. (NYSE:BWA) has taken over the #17 spot from Mohawk Industries, Inc. (NYSE:MHK), according to ETF Channel.
Below is a chart of BorgWarner versus Mohawk Industries, plotting their respective ranks within the S&P 500 over time (BWA plotted in blue; MHK plotted in green):
In forming the rank, the analyst opinions from the major brokerage houses were tallied and averaged. Then, the underlying components were ranked according to those averages.
Investors often interpret analyst opinions from different angles — a popular analyst pick could mean that many sharp minds individually came to the same bullish conclusion, and therefore. the stock should do well. However, a popular analyst pick could also mean that if the company makes any slight stumble, that would result in a negative surprise and cause a downward impact on the stock.
From the other direction, when companies have low ranks among analysts, it isn’t necessarily the case that investors should conclude that the stock will perform poorly. A low rank can mean poor performance, of course, but a bullish investor, who can make a case for a positive future catalyst, could also take the contrarian angle and recognize that there is lots of room for upside since the stock is presently so out of favor.
For these reasons, we at ETF Channel find value to putting together these rankings because both the top and the bottom ends of the lists can often make for some interesting stock picking ideas for further research.
Below is a three-month price history chart comparing the stock performance of BWA versus MHK:
According to the ETF Finder at ETF Channel, BWA and MHK collectively make up 2.56% of the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (NYSEARCA:RCD).
BWA is currently trading down about 2.5%, while MHK is up about 1.2% midday.