Regular readers know that our models follow the Wall Street analyst recommendations closely, but not the way that you might think. Typically, investors love to buy hot stocks that analysts are heavily recommending as a buy, as it feels good to run with the crowd. Intuitively though, you should be looking for the stocks that Wall Street hasn’t already blanketed with buy recommendations if you really want to make money.
Why? Think about it. If everyone has already recommended the stock as a buy, then there’s no room for more recommendations to drive prices higher.
Instead, if you’re able to find the hot stocks that are rocketing higher and the analysts have missed so far … well now you’re getting into something that’s more likely to see upgrades that will drive prices even higher. We call them “underappreciated outperformers.”
The following seven stocks are on our most recent list of underappreciated outperformers and represent stocks that you should consider before the Street catches on to what they’ve missed and start the upgrade cycle.
Hot Stocks to Buy: Nvidia Corporation (NVDA)
Semiconductor companies have been leading the tech sector higher, which is always a sign that a healthy economic expansion and increased risk-taking is at the heart of a market rally.
Nvidia Corporation (NASDAQ:NVDA) shares have been one of the strongest performers over the last three years, which should have it on every analysts’ buy list.
Not the case here though, as only 59% of the analysts covering the stock have it ranked a buy and 11% have the stock as a sell. Shares of NVDA are 57% higher for the year and 187% higher over the last 12 months, making those that don’t have it ranked a buy looking like they’re missing the boat.
Nvidia stock has earnings coming up and another positive report will get the bears jumping on the bandwagon with upgrades. We expect to see another 30% gain in NVDA shares before the end of the year.
Hot Stocks to Buy: Wynn Resorts, Limited (WYNN)
People are travelling again as consumer confidence and wages are on the rise.
Wynn Resorts, Limited (NASDAQ:WYNN) reflects that as the stock is trading 48% higher since the beginning of the year. Despite the stellar performance, only 27% of the Wall Street analysts covering WYNN have it ranked a buy. Talk about missing the boat.
Besides trading in an intermediate-term bullish trend, the shares have been in a bull market since November 2016 when they crossed above their 20-month moving average. This should be attracting more long-term buyers like analysts.
We’re expecting the other 73% to start upgrading WYNN shares, driving the stock to a target of $160.
Hot Stocks to Buy: Intuitive Surgical, Inc. (ISRG)
Healthcare related stocks are getting back on track after a lot of uncertainty over the last two years.
Intuitive Surgical, Inc. (NASDAQ:ISRG), best known for manufacturing robotic devices for surgery, are showing that as the stock has surged more than 45% in 2017.
Analysts continue to sit on the sidelines on ISRG and other healthcare stocks. Right now, only 56% of those tracking the stock rank it a buy. This is a big name in the space to be sitting on a hold or sell recommendation meaning we’re going to see upgrades.
ISRG stock is driving to new highs that will lure upgrades. Our models target another 20% for Intuitive Surgical shares by year-end.
Hot Stocks to Buy: First Solar, Inc. (FSLR)
We’ll start by saying that the solar and many solar-related companies have been a little testy given the fact that a number of these companies operate with heavy support from government programs.
Nonetheless, First Solar, Inc. (NASDAQ:FSLR) shares have just moved into a bull market as the stock crossed above its 20-month moving average on their latest earnings.
FSLR stock has been sound technically over the intermediate-term and the move above the long-term, 20-month moving average will attract more buyers and upgrades. Right now, only 47% of the analysts covering the stock have it as a buy, a number that will grow over the second half of the year.
We’re expecting First Solar shares to potentially drive to the $70-mark before easing.
Hot Stocks to Buy: Best Buy Co Inc (BBY)
Best Buy Co Inc (NYSE:BBY) is benefiting from increased spending and shopper’s renewed interest in buying electronics that they can reach out and touch and try.
Last quarter, Best Buy knocked the cover off the ball with their earnings report, driving a 20% rally. Year-to-date, BBY stock is more than 40% higher.
With only 35% of the analysts covering Best Buy as a buy and 15% rating it a sell, we’re confident that the upgrades are coming, especially if the company strings another positive earnings report together on Aug. 29.
Expect to see the upgrades drive a price target of $68 over the next three to six months.
Hot Stocks to Buy: PulteGroup, Inc. (PHM)
Housing stocks are back on the bullish list and PulteGroup, Inc. (NYSE:PHM) is a great example. PHM is trading 35.6% higher for 2017 and following a strong long-term bullish trend that will continue to attract buyers.
We’ve seen some short sellers covering their positions over the last few months, which indicates that the “crowd” is starting to give up on this stock as a straw man and accepting the fact that the rally is real. The analysts should be the next group to capitulate.
Currently, 43% of the Wall Street analysts covering PHM stock have it ranked a buy leaving plenty of room for the stock to move higher as this group starts to cover themselves by upgrading PulteGroup to a buy.
We’re expecting to see these upgrades to move the stock to our target of $27.50.
Hot Stocks to Buy: Moody’s Corporation (MCO)
The bond market is alive and well again as fears of higher interest rates have companies and municipalities going back to the debt market to raise cash.
This means Moody’s Corporation (NYSE:MCO) is getting busy again, clearly something that is good for the stock.
Moody’s shares are tripling the S&P 500 performance YTD as the stock is up more than 35%. The stock started in 2017 by moving into a long-term bull market as shares crossed above the 20-month moving average. This alone increased buying volume, but the analysts persist with their relatively bearish outlook.
Only 22% of the analysts have MCO stock ranked a buy, while the rest rank the stock a hold. We’re sure to see upgrades as the analysts will migrate to buyers of the stock, despite the fact that it has been making new highs. The recent “sell the news” correction after the company’s latest earnings report should open a window for upgrades and a target of $140.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.