Psychologically, it’s easier to buy stocks that everyone likes and sell stocks that everyone dislikes because it can be hard to believe that the crowd could be wrong.
However, some of the greatest fortunes have been made by investors willing to make contrarian bets in the market.
With that in mind, here’s Credit Suisse with their list of 18 contrarian stock picks, including 12 that they think Wall Street is too bearish on and 6 on which the consensus is too bullish.
“We screened our current US coverage universe to identify companies where our analysts’ views diverged from that of the Street, focusing on both rating as well as earnings projections,” said Credit Suisse in the note, which was circulated to clients on Friday. “To further strengthen the list of stocks, we worked closely with the research analysts to select stories in which our conviction level is high. The result is a list of 12 Outperform-rated names and 6 Underperform-rated stocks.”
Below are the 18 companies, Credit Suisse’s target for the stock price, a snippet of their contrarian rationale, and a little information on the company.
Target Price: $US24.00
Company Description: Box is a leading enterprise content management and collaboration platform, helping businesses securely access and manage their critical information in the cloud.
Why Credit Suisse sees it differently: 'Box has a more appealing file sync and share (FSS) product than Microsoft and sufficient lead time to further improve its competitive position and expand its user base.'
Target Price: $US70.00
Company Description: CF Industries is a leading fertiliser manufacturer and distributor.
Why Credit Suisse sees it differently: 'We have a distinct appreciation for CF's North American transportation & logistics capabilities given our contacts throughout the global agricultural value chain.'
Target Price: $US145.00
Company Description: L-3 is a defence contractor making planes, weapons and other electronic systems for government and commercial purposes.
Why Credit Suisse sees it differently: 'LLL trades at a 30% discount on FCF yield relative to its peers because it had execution issues but that's temporary, and additionally, it should benefit from likely disposal of non-core assets.'
Target Price: $US39.00
Company Description: LaSalle Hotel Properties is a leading multi-operator real estate investment trust that owns 47 upscale hotels in 10 states.
Why Credit Suisse sees it differently: 'The indiscriminate sell-off of lodging offers a rare opportunity to buy a blue chip lodging REITs at a significant discount to intrinsic value.'
Target Price: $US25.00
Company Description: Nationstar Mortgage is one of the nation's leading mortgage servicers and lenders offering products directly to consumers.
Why Credit Suisse sees it differently: 'NSM is attractively valued with potential catalyst from a minority stake sale in Xome (formerly Solutionstar).'
Target Price: $US21.00
Company Description: WisdomTree is currently the industry's fifth largest ETF provider, with 79 ETFs available.
Why Credit Suisse sees it differently: 'We believe the stock is undervalued versus both slower growth traditional asset managers and high growth tech / fin-tech stocks given our high growth profit forecasts.'
Target Price: $US60.00
Company Description: Dollar Tree is a low-cost retail company, providing a wide variety of products for around $US1.
Why Credit Suisse sees it differently: 'We believe the Street is underestimating the execution risk surrounding DTLR's recent acquisition of FDO as well as the level of investment needed to turn around this underperforming asset.'
Target Price: $US52.00
Company Description: Hyatt is one of the world's largest chains of lodging, hotels, and resorts.
Why Credit Suisse sees it differently: 'As supply comes to the lodging market, H will underperform peers given its leverage to owned hotels, which will have more volatility vs. peers who primarily manage hotels.'
Target Price: $US19.50
Company Description: PulteGroup is a homebuilder that operates in around 50 markets throughout the country.
Why Credit Suisse sees it differently: 'We estimate earnings growth will continue to lag other large cap peers based on our forecasts for more modest revenue growth than consensus and our expectation that rising land and labour costs will pressure margins.'
Target Price: $US40.00
Company Description: Realogy Holdings Corp is an owner of franchised real estate brands such as Coldwell Banker and Century 21.
Why Credit Suisse sees it differently: 'We estimate decelerating transaction volume growth, particularly in RLGY's core markets, along with margin headwinds from elevated agent commission splits and investments, will result in sales and EBITDA below consensus expectations.'