So, the bull market is now seven and a half years old, valuations are high, the Federal Reserve wants to raise interest rates and there are uncertainties about the election and growth ahead. Most investors have still been lining up to buy stocks on pullbacks. One day, maybe there will be another serious market correction, or even a bear market.
Investors frequently hear analysts on Wall Street talk about why certain stocks are heading higher. They hear “buy this stock” a lot, but they are often confused and on their own when it comes time to sell a stock. The worst-kept secret on Wall Street is that the analysts have many more Buy ratings than Sell ratings.
24/7 Wall St. reviews dozens of analyst research reports each morning. The goal is to find new investing and trading ideas for our readers.
Some analyst research reports cover stocks to buy, and some reports feature stocks to sell or to avoid. It is this latter category that can freak investors out.
It is not infrequent that investors worry that maybe they are holding on too long or are being too optimistic if they hear the word “Sell” from an analyst report. After all, the analysts are all supposedly smart and probably know more about a stock, sector and the market than the Average Joe. Sometimes that is true and sometimes it is not. What if you are already in a loss on the stock? Could stocks really go lower?
These eight large, well-known stocks received Sell, Underperform or Underweight ratings in the week of October 7, 2016. Just remember one thing: analysts are not omniscient. They are frequently wrong, even if you might think they are supposed to be smarter than others.
American Express Co. (NYSE: AXP) was downgraded to Reduce from Neutral at Nomura, the equivalent of a Sell rating. The firm lowered its price target to $56 from $62 in the call, versus a $64.36 prior closing price, but Amex shares closed out the week at $61.76. On top of a market share loss, Nomura worries about softer than expected revenues and higher than expected expenses.
American Express has a 52-week trading range of $50.27 to $77.82 and a consensus analyst price target of $67.18. This October 6 call was covered in full detail.
Cliffs Natural Resources Inc. (NYSE: CLF) was reinstated as Underperform at Credit Suisse on October 7. The firm pointed out that there has been a sharper than anticipated decline in hot-rolled sheet pricing that would pressure earnings and margins, and it now has a mere $2 price target.
The shares closed down 1.7% at $5.58 on Thursday ahead of the call and were indicated down 1.4% at $5.50 on Friday morning, but the still managed to close up two cents at $5.60 despite the equivalent of a Sell rating. The 52-week range is $1.20 to $8.45, and the consensus analyst target is $6.50.
National Oilwell Varco Inc. (NYSE: NOV) was downgraded to Sell from Neutral with a $30 price target at Citigroup on October 3. The prior closing price was $36.74, but by the end of the week shares traded at $36.84.
The 52-week range is $25.74 to $42.62. The consensus price target is $31.79.