Saturday, March 18, 2006

Analysts say this portfolio will underperform

It's a given that almost all stocks that analysts follow have a "buy" or "hold" rating. For instance, in work done by the The Globe and Mail's Rob Carrick, of the 500 S&P stocks, only four could be found that had a consensus "sell" rating. Only a single S&P500 stock garnered a consensus "strong buy".

So with the idea that these "strong buy" or "sell" ratings could be an indicator of future outperformance (academic work has shown that, on average, "sell" rated stocks outperform the broader market), the S&P500 and Nasdaq stocks that have garnered a consensus "sell" rating are presented, together with their stock symbol and closing price at March 16:
  • Aether Holdings - AETH - $3.27
  • Creative Technology - CREAF - $7.29
  • Dillards - DDS - $26.43
  • Eastman Kodak - EK - $29.27
  • Ford Motor Co. - F - $7.93
  • General Motors - GM - $22.22
The first two are Nasdaq-listed stocks, while the later four form part of the S&P500.

And for our Canadian readers, there a similar analysis of the S&P/TSX composite yielded the following TSX listed-stocks:
  • Advantage Energy Income - AVN.UN - $22.95
  • InterOil - IOL - $15.99
  • Prime West Energy Trust - PWI.UN - $33.59
  • Royal Group Technologies - RGY - $10.22
  • Sobeys - SBY - $38.30
  • Sears Canada - SCC - $17.85
  • Tesco -TEO - $21.48
  • Torstar - TS.NV.B - $22.85
With the exception of the energy-oriented Canadian companies, most of them appear to be in unloved industries - usually a deep-value investors first good sign! We'll follow this portfolio, euphemistically named "The Tortoise Portfolio", periodically to see how it's doing against the broader market.

Very soon in the future, we'll also present the opposite portfolio; one in which the consensus ratings are only "strong buys", which we'll nickname as "The Hare Portfolio". Due to the boosterism here, a few adjustments had to be made to whittle the list to a manageable amount. Stay tuned.


The Confused Capitalist

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