Looking for a contrarian play? We created a list of stocks that are seeing very contradicting plays by "smart money" investors. Specifically, UBS has a Buy rating on these stocks, but hedge funds are still jumping ship. What gives?
When UBS issues a Buy rating on a stock, it is considered a good sign for the company's future prospects in the market. Their analysts' full-time job is to analyze companies, so their word is as professional as it gets. They often have personal relationships with the companies they are assigned to, and visit the company to get more accurate figures out of their value.
Also, analysts may only adjust the rating once they believe their full potential has been reached or has diminished prospects (often a change from buy to hold).
Meanwhile, institutional investors are net selling these stocks at significant levels in the current quarter. These "smart money" investors typically have access to more sophisticated market data, so their collective movements can serve as indicators to the wider investment community.
Compare changes in average analyst ratings. The stocks listed below have buy ratings from UBS, but clearly, not all analysts agree:
The "Buy" rated names have seen significant net selling from hedge funds in the current quarter. Do you think they are onto something? Use this list as a starting point for your own analysis.
1. Arch Coal Inc. (ACI): Engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States. As of December 31, 2010, it operated or contracted out the operation of 23 active mines; and owned or controlled approximately four. Market cap at $1.63B, most recent closing price at $7.56.
Net institutional sales in the current quarter at -15.9M shares, which represents about 7.54% of the company's float of 211.00M shares.
On 05/14/2012, UBS had a Buy rating on the stock.
2. Embraer SA (NYSE:ERJ): Engages in the development, production, and sale of jet and turboprop aircraft for civil and defense aviation markets. Market cap at $4.95B, most recent closing price at $26.65.
Net institutional sales in the current quarter at -13.8M shares, which represents about 8.05% of the company's float of 171.49M shares.
On 08/02/2012, UBS had a Buy rating on the stock.
3. HCA Holdings, Inc. (NYSE:HCA): Offers health care services in the United States. Market cap at $14.02B, most recent closing price at $31.71.
Net institutional sales in the current quarter at -84.6M shares, which represents about 41.71% of the company's float of 202.84M shares.
On 06/20/2012, UBS had a Buy rating on the stock.
4. Luminex Corporation (NASDAQ:LMNX): Develops, manufactures, and sells proprietary biological testing technologies and products for the life sciences and diagnostic industries in the United States. Market cap at $689.65M, most recent closing price at $16.64.
Net institutional sales in the current quarter at -3.2M shares, which represents about 8.62% of the company's float of 37.12M shares.
On 08/23/2012, UBS had a Buy rating on the stock.
*Analyst data sourced from Reuters, institutional data from Fidelity, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.