Francisco Mingorance via National Geographic
Finding cheap stocks isn’t easy anymore. You’ll need to be a bit more sly to outfox the market.
Just eight stocks, including meat packer Tyson Foods (TSN), oil company Tesoro (TSO) and biotechGilead Sciences (GILD), pass muster a group of some of the most clever stock mavens out there. These stocks are rated “outperform” or better by analysts and still have upside to their 18-month price targets, are listed on Gradient Analytics’ “Baker’s Dozen” top stock picks for 2015 as well as carry “neutral” or better ratings from New Constructs, which operates a computer system that compares stocks’ prices to their intrinsic value.
Finding stocks that get the OK from these very different groups of sly analysts is telling. Wall Street analysts dig into the companies’ earnings calls and make comprehensive looks at the industries and fundamentals. Gradient is known for doing meticulous analysis of the footnotes of companies and assessing all risks and opportunities – including many ignored by most investors. Gradient’s top picks for 2015 are already up 9% this year, beating the Standard & Poor’s 500’s 1.1% gain. And New Constructs’ computer model examines adjusted earnings to get to core cash flow power and what stocks could be worth in the future.
If there’s a stock most think can outfox the market it’s biotech Gilead Sciences. The company is working on a variety of breakthrough treatments for everything from HIV to liver disease. It’s the only stock on the list that gets New Constructs’ coveted “very attractive” rating – in addition to the approval of Gradient and 19% potential upside before hitting analysts’ 18-month price target. The stock is up 6% this year – although analysts expect adjusted profit to jump nearly 18% this year. Shares closed Wednesday at $99.87.
Contrarian investors might be tempted with Tyson Foods. The meat seller is a favorite with Gradient and analysts – but the stock is down 3.6% this year. Analysts think the stock, which closed Wednesday at $38.65 a share, could be worth $48.62 a share in 18 months. That’s nearly 26% potential upside. Analysts expect the company’s adjusted profit to rise more than 17% this year. And the stock yields a 1% dividend, to boot.
Could all these sly investment firms be wrong? Certainly. And that’s why – for most investors – nothing beats a low-cost index fund. But one things for sure – with the market itself arguably fully valued – investors will at need to at least try to be more clever if they want to get ahead.
STOCKS THAT ARE APPROVED BY SEVERAL ‘CLEVER’ GROUPS OF INVESTMENT ANALYSTS
| Company | Symbol | Upside to 18-month target | YTD % Ch. | Analyst rating | N.C. rating * |
| Tyson Foods | TSN | 25.8% | -3.6% | Outperform | Neutral |
| Tesoro | TSO | 22.6% | 15% | Outperform | Neutral |
| Gilead Sciences | GILD | 19% | 6% | Outperform | Very attractive |
| Cummins | CMI | 14.7% | -6.4% | Outperform | Neutral |
| Express Scripts | ESRX | 9.7% | -0.4% | Outperform | Neutral |
| NXP Semiconductors | NXPI | 7.4% | 33.3% | Buy | Neutral |
| Cognizant Tech. Sols. | CTSH | 5.4% | 18.8% | Outperform | Neutral |
| U.S. Silica | SLCA | 2.7% | 41.9% | Outperform | Neutral |
Source: S&P Capital IQ, USA TODAY, Gradient Analytics, New Constructs
* New Constructs rating
* New Constructs rating
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