Wall Street stock analysts tend to be much like a herd of cattle. They generally go in the same direction, and for obvious reasons. The big companies want their analysts to follow the big stocks, as that is usually where the most investor interest lies. One would think that the stocks that get the most coverage might also be the best performing. However, this is not always the case.
A new Jefferies research report looks at 35 companies that are undercovered by Wall Street analysts, and in some cases, unloved as well.
The report noted this:
The average S&P stock is covered by 19 analysts, some are covered by as many as 50, and aside from being well-vetted stories, stocks with high coverage also tend to underperform. Actually, the sweet spot for performance is in stocks that are covered by between 3 and 10 analysts. We highlight 35 stocks covered by Jefferies that are above $1 billion in market capitalization, which sit in the coverage sweet spot of 3 to 10 analysts and where analysts have particular conviction.
We screened the 35 companies and found five that look particularly interesting now. All are rated Buy at Jefferies.
Jefferies sees this stock as another top value play in 2018. It has been a favorite at the firm for some time and remains a top small-cap pick. Arris International PLC (NASDAQ: ARRS) provides media entertainment and data communications solutions in the United States and internationally. It operates through two segments.
The Customer Premises Equipment segment offers various product solutions, including set-top boxes, gateways, digital subscriber lines and cable modems, and embedded multimedia terminal adapters and voice/data modems that enable service providers to offer voice, video and high-speed data services to residential and business subscribers.
The Network & Cloud segment provides cable modem termination system, converged cable access platform, multichannel video programming distributors, programmer equipment, ad insertion technologies and equipment in the ground or on transmission poles, as well as equipment used to initiate the distribution of content-carrying signals.
The $38 price objective compares with the Wall Street consensus target price of $31.70. The shares closed Wednesday at $24.18.
Jefferies started coverage on this biotech/medical technology company with a Buy rating late last year. AxoGen Inc. (NASDAQ: AXGN) offers surgical solutions for peripheral nerve injuries. It provides products and education to improve surgical treatment algorithms for peripheral nerve injuries. Its portfolio of products includes Avance Nerve Graft, AxoGuard Nerve Connector, AxoGuard Nerve Protector and Avive Soft Tissue Membrane.
The company also offers the AxoTouch Two-Point Discriminator and AcroVal Neurosensory and Motor Testing System. These evaluation and measurement tools assist health care professionals in detecting changes in sensation; assessing return of sensory, grip and pinch function; evaluating treatment interventions; and providing feedback to patients on nerve function.
Jefferies has a $45 price target for the shares, though the consensus figure is $47.00. The stock closed trading on Wednesday at $38.75.
This company has been touted as a potential takeover target as it may be a very solid fit for a big medical device’s player. Haemonetics Corp. (NYSE: HAE) is a health care company that provides products for processing, handling, and analysis of blood in North America, Europe, Africa and the Asia-Pacific.
Haemonetics offers plasma collection and storage products, including PCS brand plasma collection equipment and disposables, plasma collection containers and intravenous solutions, as well as information technology platforms for plasma customers to manage their donors, operations and supply chain.
The Jefferies price target is $110, and the consensus target is $94.57. The stock closed Wednesday at $101.77.
This is the top coal pick at Jefferies and one of the best run companies in the industry. Peabody Energy Inc. (NYSE: BTU) is engaged in the mining of thermal coal for sale primarily to electric utilities and metallurgical coal for sale to industrial customers. Its mining operations are located in the United States and Australia.
Peabody’s segments are Powder River Basin Mining, Midwestern U.S. Mining, Western U.S. Mining, Australian Metallurgical Mining, Australian Thermal Mining, Trading and Brokerage, and Corporate and Other.
The company also markets and brokers coal from other coal producers, both as principal and agent, and trades coal and freight-related contracts through trading and business offices in Australia, China, Germany, India, Indonesia, the United Kingdom and the United States.
Shareholders receive a 1.14% dividend. The $55 Jefferies price target compares with the $52.86 consensus target. The stock closed Wednesday at $43.89.
Jefferies has been bullish on this stock since starting coverage on it in 2016. Radware Ltd. (NASDAQ: RDWR) is a global leader of application delivery and application security solutions for virtual, cloud and software-defined data centers. Its award-winning solutions portfolio delivers service level assurance for business-critical applications, while maximizing IT efficiency.
Radware’s solutions empower more than 10,000 enterprise and carrier customers worldwide to adapt to market challenges quickly, maintain business continuity and achieve maximum productivity while keeping costs down.
Jefferies has set its price target at $34.50. The consensus target is $30.25, and the stock closed Wednesday at $27.36.
Five top stocks that are hardly covered by Wall Street that could bring big gains for investors. While not suited for most conservative portfolios, they make sense for aggressive investors looking for gems that are not crowded trades.