When analysts say 'sell,' it is time to buy, data show
Stocks unpopular with Wall Street up 165% since March 2009
January 16, 2011 6:01 am ET
Following the advice of equity analysts may be perilous to your profits
Although companies in the S&P 500 that analysts loved the most saw their stocks rise 73% on average since the benchmark for U.S. equity started to recover in March 2009, those with the fewest “buy” recommendations gained 165%, according to data compiled by Bloomberg.
Don Wordell, a fund manager at RidgeWorth Capital Management Inc., said that equities that Wall Street firms rate lowest are more likely to beat the market.
“When you have a stock that has 15 analysts covering it and it has 15 "buys,' I can't imagine it has much outperformance left,” said Mr. Wordell, whose $1.64 billion RidgeWorth Mid-Cap Value Equity Fund topped 98% of its peers over the past five years. “You've got a stock that has 15 "sells' on it, you're set up there to have some strong outperformance.”
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