WHAT ARE WE LOOKING FOR?
Stocks with the lowest expectations from analysts.
MORE ABOUT TODAY'S SCREEN
Analysts are generally a pretty positive bunch. "Sell" recommendations are usually few and far between. Today, let's look for stocks they believe have the worst outlook.
We'll look for stocks that have a median rating of "hold," "sell" or "strong sell." Then we'll look for the ones that have median target prices furthest below their actual stock prices.
The stocks need to have a minimum market cap of $250-million. All figures are converted to Canadian dollars and we'll use Thomson One Analytics for the screen.
WHAT DID WE FIND OUT?
Bloomberg columnist John Dorfman, also chairman of Thunderstorm Capital in Boston, has done studies of stocks with the most positive recommendations and negative recommendations. In a recent column, he laid out how stocks with the most positive recommendations will underperform stocks with the most negative recommendations about half the time.
Last year, as he said, the despised stocks, led by Sears Holdings Corp., rose 47 per cent, compared with 23 per cent for the analysts' favourites. "Analysts are not all-knowing," he wrote. "For the most part, they are intelligent, well informed and highly paid. But like most human beings, they extrapolate the recent past as a guide to what comes next."
Mr. Dorfman doesn't look at target prices, only recommendations, and includes U.S. stocks, but Gabriel Resources made his list of the most "despised" stocks this year, with four analysts calling the stock a "sell" and one a "hold." According to Bloomberg, those recommendations are the same now as when he wrote his column.