Investors should cheer that the current bull market is now over nine years old. At the same time, it is obvious that the trend of the past five years of buying on all the pullbacks has become much more vulnerable. It now seems as though sellers and volatility are able to take control around each major headline that previously would have been ignored. All this adds up to a scenario in which investors are having ever more difficulty trying to decide how they want their assets positioned for the rest of 2018 and beyond.
24/7 Wall St. reviews dozens of analyst research reports each day of the week to find new investing ideas and trading ideas for those with both short-term and long-term horizons. Some of these daily analyst reports cover stocks to buy, but some of the Buy or Outperform ratings stand out handily from the majority of analyst calls on the same issues. This is where contrarian investing comes into play.
Credit Suisse has issued eight fresh contrarian picks in which it sees far higher upside than most of Wall Street. For a reference, most analyst calls now are looking for 8% to 10% upside in S&P 500 and Dow Jones industrial average stocks. Some of the Credit Suisse contrarian picks are calling for 10% to 30% in implied upside, and perhaps even more once Wall Street catches on and if things go their way.
Additional color and trading history has been added for each of the contrarian picks featured here. Valuation metrics and consensus estimates are from the Thomson Reuters sell-side research service.
Cleveland-Cliffs Inc. (NYSE: CLF) has a $9 price target at Credit Suisse, which is about 30% higher than the recent $6.85 price. The firm sees Cleveland-Cliffs continuing to take market share in U.S. value-add flat-rolled and helping its hot-briquetted iron (HBI) operations. The HBI project is expected to be accretive as the company shifts away from lower margin pellet contracts toward higher margin contracts. Tax reform is also expected to drive $250 million in cash refunds through 2022 and allow the company a full utilization of $2.5 billion in net operating loss carryforwards.
Shares of Cleveland-Cliffs were last seen up about 1.5% on the day to $6.95. It has a consensus analyst target price of $8.00 and a 52-week trading range of $5.56 to $9.15. This was a $20 stock back in 2013, but it was up at almost $100 briefly in 2010.
Ralph Lauren Corp. (NYSE: RL) has a $125 price target at Credit Suisse, which is up just 9% higher than the $114.36 recent share price. The firm expects that Ralph Lauren will lay out a plan to return to positive revenue growth by late fiscal 2019. The firm also sees the company as in the later stages of rebasing its brand to return to growth after three years of declines with a significantly reduced cost structure. Valuations are also well under its peer group, and any signs of improving fashion should help this out of favor stock. Out of 18 analysts, Credit Suisse is just one of four with Buy or Outperform ratings, which also implies that many analyst upgrades will be behind the curve if the turnaround looks more clear.
Ralph Lauren shares were last seen barely higher to $114.55. The 52-week range is $66.06 to $119.33, and the consensus target price is $112.57. For reference on how far this name came down, Ralph Lauren was a $185 stock back in late 2014.
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA) has a $23 price target at Credit Suisse, up about 28% from the current $17.99 share price. The consensus target price is near $19.30. Credit Suisse is more bullish than most firms on the execution of all (or most of) the ambitious restructuring plan for 2018 and 2019, noting that its CEO track record should enable Teva to execute its restructuring plan in a swift and efficient manner of streamlining operations while also improving its debt situation over time. Credit Suisse sees Teva eliminating low and negative margin products from the generics business. The firm raised Teva’s rating just on February 11, 2018, and it expects the company to have continued success on improving a very cautious investor sentiment ahead.
Teva was last seen up 1.3% at $18.25, in a 52-week range of $10.85 to $33.82. Its shares reached almost $70 in mid-2015.