Contrarian Ideas: Stock Market Analysts Extremely Cautious on 2012

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFAShort data sourced from Yahoo! Finance.)

Analysts predict the Standard & Poor’s 500 Index will rise 6.4% in 2012, reports Bloomberg, the lowest returns since 2005. Bloomberg compiled a survey of 12 strategists’ estimates and found most, but not all, are erring on the side of caution.

Fears of global budget deficits have dimmed the horizons for many equity analysts. Some believe “the prospect of a global slowdown will curb investors’ appetite for equities” and keep the S&P index from rallying as it has in years past.

Others are more cautious: “Adam Parker of Morgan Stanley, whose estimate for 2011 proved the most accurate among current analysts, forecast a loss of 7.2 percent as Europe’s debt crisis will keep volatility above historical levels.”  His prediction is the most pessimistic.

“A year is a long time” says Jonathan Golub, market strategist at UBS. He remains mildly cautious about 2012, predicting the index will climb to 1,325 in 2012, the same forecast he gave at the beginning of last year. “Will there be better entry points than right now? We think the answer is yes.”

And still others feel the market is promising: According to Bloomberg the bulls at Oppenheimer & Co. and Citigroup say record profits and improving U.S. economic data will propel stocks.

S&P Gains

In all, analysts forecasts polled by Bloomberg estimate the S&P 500 index will climb to 1,388. This accounts for investor concerns relating to the upcoming presidential election, and growing debt in China and Europe.

The S&P index was virtually unchanged in 2011, adding 11.33 points, or 0.9%, to reach 1,265.33. It started the year at 1,257.64. The 2011 gains were about 8.3% below the 1,371 average strategist estimate from 12 months earlier – the biggest miss since 2008.

Business Section: Investing Ideas

Stock market analysts appear to be very gloomy about the outlook for the global economy, which should raise a flag if you’re a contrarian investor.

To help you get started exploring, we started with the 200 worst performing S&P 500 stocks during 2012.

To refine the list, we collected data on short-seller trends, and identified the names that have seen a significant decrease in shares shorted during the current month (i.e., short-sellers think the upside of these stocks outweighs the downside)

Contrarian alert: Sophisticated investors, like short-sellers, think these loser stocks are going higher–do you agree?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by performance over the last year.

1. Netflix, Inc. (NFLX): Provides subscription based Internet services for TV shows and movies in the United States and internationally. The stock lost 59.51% over the last year. Shares shorted have decreased from 10.87M to 9.88M over the last month, a decrease which represents about 1.94% of the company's float of 51.16M shares.

2. United States Steel Corp. (X): Produces and sells steel mill products in North America and Central Europe. The stock lost 52.98% over the last year. Shares shorted have decreased from 35.97M to 33.95M over the last month, a decrease which represents about 1.41% of the company's float of 143.22M shares.

3. SunTrust Banks, Inc. (STI): Operates as the holding company for SunTrust Bank, which provides various financial services to consumer and corporate customers in the United States. The stock lost 38.37% over the last year. Shares shorted have decreased from 16.68M to 10.34M over the last month, a decrease which represents about 1.27% of the company's float of 499.83M shares.

4. Starwood Hotels & Resorts Worldwide Inc. (HOT): Operates as a hotel and leisure company worldwide. The stock lost 19.44% over the last year. Shares shorted have decreased from 11.82M to 9.53M over the last month, a decrease which represents about 1.21% of the company's float of 188.91M shares.

5. Cliffs Natural Resources Inc. (CLF): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. The stock lost 18.67% over the last year. Shares shorted have decreased from 8.83M to 7.25M over the last month, a decrease which represents about 1.11% of the company's float of 142.11M shares.

6. Allegheny Technologies Inc. (ATI): Produces and sells specialty metals worldwide. The stock lost 11.57% over the last year. Shares shorted have decreased from 6.36M to 5.28M over the last month, a decrease which represents about 1.09% of the company's float of 99.03M shares.

7. Vulcan Materials Company (VMC): Engages in the production and sale of construction aggregates for the infrastructure industry primarily in the United States. The stock lost 8.93% over the last year. Shares shorted have decreased from 20.05M to 18.23M over the last month, a decrease which represents about 1.41% of the company's float of 128.64M shares.

8. Gannett Co., Inc. (GCI): Operates as a media and marketing solutions company in the United States and internationally. The stock lost 8.66% over the last year. Shares shorted have decreased from 26.04M to 21.51M over the last month, a decrease which represents about 1.91% of the company's float of 236.63M shares.

9. Windstream Corporation (WIN): Provides communications and technology solutions in the United States. The stock lost 8.53% over the last year. Shares shorted have decreased from 45.38M to 28.77M over the last month, a decrease which represents about 3.25% of the company's float of 511.69M shares. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets


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