Analyst darlings, market dogs

Equity investors have had a heck of a time making money this year. The TSX in particular has seen a nasty spill from the highs in the big sectors such as banks, materials and energy.

And, while the S&P 500 is in positive territory for the year, there are lots of stocks that have dramatically underperformed. Yet, analysts continue to have “Strong Buy” recommendations on these companies, earnings expectations are positive and valuation modest.

So let’s take a look at these analyst darlings.

I did a screen of the S&P 1500 and the S&P/TSX Composite. Those two indices represent 1751 stocks between the two countries. Of those, almost 40 percent (656 companies) have a preponderance of buys versus holds and sells.

Now, of course, analyst enthusiasm doesn’t necessarily justify you being enthused as well -- but it isn’t a bad place to start.

I reduced that list further by those that had underperformed both on a year-to-date and on a one-year basis screening for those that are down 10 percent year-to-date (142 companies) and those that are down more than 20 percent from their 52-week high (290 companies).

Maybe not surprisingly, the names on that list tend toward the cyclical, energy, and materials sectors. There are very few technology or consumer staples names reflecting the worries of global recession and the defensive posturing of global portfolio managers.

But, if you’re looking for companies that have survived many a cycle, and you believe that eventually the analytical community might be right in their bullishness, you may want to look at some of these analyst darlings, market dogs.

Some names on these lists, in no particular order, include Canadian Natural Resources (CNQ-T), Freeport McMoRan (FCX-N), Caterpillar (CAT-N), Barrick Gold (ABX-T), Ford (F-N), Potash (POT-T), Bombardier (BBD.B-T), Cisco (CSCO-Q), Decker Outdoors (DECK-Q), Fluor (FLR-N), McDonalds (MCD-N) and Smithfield Foods (SFD-N).

As always, do your homework but some of these dogs may become stars.