Contrarian Signal: Wall Street Analysts Turning More Bearish

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

Wall street experts surveyed by CNN are largely “throwing in the towel” on hope for a stock market rebound and now expect the S&P to close at 1253 points, less than one percent below the year’s start.

CNN Money reports, “investment strategists and money managers expect the S&P 500 (SPX) to claw back almost about 5% before the ball drops in Times Square, but that still won’t be enough to end the year in black.”


The news that the market could end on near-equal footing with the years’ opening is not necessarily bad news – it could be worse – but these expectations show “bullishness from earlier this year has faded. Even as recently as August, strategists were forecasting the S&P 500 to end 2011 up 7%, with only one survey participant thinking the S&P would finish in the red.”

One of the reasons investors are changing their tune is an increasingly dismal outlook for the fourth quarter. The end of year shopping season is one of the strongest for the economy, and while it may cause an uptick in the markets, it is unlikely to change the minds of investors who currently lack confidence in the market.

Of course, all of this negativity could present an opportunity for contrarian investors who often see excessive pessimism as a signal to buy in.

Are you looking for contrarian ideas?

The stocks mentioned below are bucking the trend–they have all seen an increase in the current year EPS analyst projection over the last 30 days. For each of these stocks, the price change has lagged the change in EPS projections, indicating that these stocks may still have to price in some good news.

In addition, all of these companies have seen short covering over the last month (i.e. short sellers are reducing bets that these stocks are going to decline).

Short sellers and wall street analysts think these stocks are expected to see more upside over the coming weeks, contradicting the bearish sentiment expressed by recent surveys. Do you think any of these stocks worth a closer look?

Use this list as a starting point for your own analysis.

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
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1. Western Refining Inc. (WNR): Operates as an independent crude oil refiner and marketer of refined products in Texas, Arizona, New Mexico, Utah, Colorado, and the Mid-Atlantic region. Shares shorted have decreased from 16.92M to 16.31M over the last month, a decrease which represents about 1.14% of the company's float of 53.73M shares. The EPS estimate for the company's current year increased from 3.13 to 3.43 over the last 30 days, an increase of 9.58%. This increase came during a time when the stock price changed by -5.03% (from 16.89 to 16.04 over the last 30 days).

2. Cal-Maine Foods, Inc. (CALM): Engages in the production, grading, packaging, marketing, and distribution of shell eggs primarily in the southeastern, southwestern, mid-western, and mid-Atlantic regions of the United States. Shares shorted have decreased from 3.35M to 3.16M over the last month, a decrease which represents about 1.41% of the company's float of 13.50M shares. The EPS estimate for the company's current year increased from 2.25 to 2.43 over the last 30 days, an increase of 8.%. This increase came during a time when the stock price changed by -0.25% (from 32.32 to 32.24 over the last 30 days).

3. Calpine Corp. (CPN): Calpine Corporation, an independent wholesale power generation company, owns and operates natural gas-fired and geothermal power plants in North America. Shares shorted have decreased from 21.05M to 13.58M over the last month, a decrease which represents about 2.7% of the company's float of 276.36M shares. The EPS estimate for the company's current year increased from 0.2 to 0.21 over the last 30 days, an increase of 5.%. This increase came during a time when the stock price changed by -1.53% (from 14.34 to 14.12 over the last 30 days).

4. Atwood Oceanics, Inc. (ATW): Engages in offshore drilling, and the completion of exploratory and developmental oil and gas wells. Shares shorted have decreased from 4.91M to 3.97M over the last month, a decrease which represents about 1.66% of the company's float of 56.50M shares. The EPS estimate for the company's current year increased from 4.02 to 4.05 over the last 30 days, an increase of 0.75%. This increase came during a time when the stock price changed by -2.43% (from 39.88 to 38.91 over the last 30 days).

5. Spreadtrum Communications Inc. (SPRD): Operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets. Shares shorted have decreased from 5.54M to 4.86M over the last month, a decrease which represents about 2.11% of the company's float of 32.19M shares. The EPS estimate for the company's current year increased from 2.26 to 2.28 over the last 30 days, an increase of 0.88%. This increase came during a time when the stock price changed by -1.1% (from 20.09 to 19.87 over the last 30 days). 



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

Referenced Stocks: ATW , CALM , CPN , SPRD , WNR

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