On Wall Street, everybody goes with the flow, which is a reality that can be good or bad. The more analysts that cover a stock, the more looks you get at the good and the bad details that a specific company has to offer. The truly difficult thing to locate in Wall Street research is ideas that everybody is not pounding the table on. The old adage of “If everybody’s heard about it, then it’s already too late” is often very true.
The analysts at SunTrust Robinson Humphrey decided to step outside of the box and swing for the fences. Fulfilling a stated commitment to helping clients generate alpha, they had the 32 publishing analysts at the firm roll up their sleeves and identify the most “out of consensus” calls. We screened for the ideas with the biggest upside and the best thesis justification.
Boulder Brands Inc. (NASDAQ: BDBD) is a leader in the gluten-free food category, and investors would have to be living on Mars to not be familiar with the growth of that industry. Gluten-free products are a $500 million a year category that has grown 12% annually over the past five years. The SunTrust call is that the company can double EBITDA and earnings-per-share in over 18 months.
The SunTrust price target on Boulder Brands is $23. The Thomson/First Call consensus target is posted at $17.75. Shares closed trading on Wednesday at $14.72. The upside to the SunTrust target is 60%.
Encore Capital Group Inc. (NASDAQ: ECPG) is a top financial stock that could have big upside for shareholders. It is an international specialty finance company with operations spanning seven countries that provides debt recovery solutions for consumers and property owners across a broad range of assets. Through its subsidiaries, Encore Capital purchases portfolios of consumer receivables from major banks, credit unions and utility providers. The SunTrust analyst thinks that the company’s expansion in Europe, as well as greater optimism on collections and margins than Wall Street anticipates, warrants a multiple that is closer to the peer-group level.
Encore trades at just 10 times anticipated 2014 earnings, and 8.8 times 2015 estimates. The SunTrust target price is $63, and the consensus is set at $54.14. The stock closed at $45.09, so the upside to the SunTrust target is right at 40%.
Freescale Semiconductor Ltd. (NYSE: FSL) is a global leader in embedded processing solutions, providing industry leading products that are advancing the automotive, consumer, industrial and networking markets, from microprocessors and micro-controllers to sensors, analog integrated circuits and connectivity. Some 45% of the company’s business is generated through the automotive industry, making the connected car a huge earnings contributor. The SunTrust analysts feel that Wall Street underappreciates the revenue growth next year, and the huge sales effort in China looks to pay off big.
The SunTrust price objective for the stock is $33, and the consensus target is at $28.20. The stock closed Wednesday at $21.76. Trading to the target would be a 55% gain.
Gulfport Energy Corp. (NASDAQ: GPOR) principal properties are located along the Louisiana Gulf Coast; in the Utica Shale, eastern Ohio; in the Niobrara Formation, northwestern Colorado; and in the Bakken Formation, western North Dakota and eastern Montana. SunTrust sees Gulfport as one of the best pure plays on the Utica Shale, and it is much higher on production estimates than the rest of Wall Street. Many on Wall Street are forecasting further delineation, down-spacing pilots and infrastructure additions, leading to higher market implied Utica values, a huge positive for the company.
SunTrust has an $86 price target, and the consensus number is set at $75.38. Shares ended Wednesday at $57.60. The upside to the target is almost 50%.
Penn Virginia Corp. (NYSE: PVA) could be one of the SunTrust home runs if the analysts are right on this call. It is an independent oil and gas company that primarily focuses on developing the Eagle Ford Shale play in south Texas. Legendary hedge fund manager George Soros owns a sizable position in the stock and has pushed hard for the company to sell itself. He has also tapered the position by selling stock and closing out call option contracts. SunTrust has confidence that upcoming Eagle Ford well results given Penn Virginia’s step-out development drilling plan in previous highly successful regions will prove to be very successful.
The firm has a $28 price objective for the stock, and the consensus target is $21. Shares closed Wednesday at $13.68. The total return to the target would be more than 100%.
Looking for trades that are not crowded in a long-running bull market can be difficult. All of the SunTrust ideas make good sense, and none of them seem inordinately biased to risk. Still, they are only really suitable for aggressive growth investors.