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By Matt Doiron

Last December J.P. Morgan analysts Thomas Lee, Daniel M. McElligot and Katherine C. Khor published a report entitled "US Equity Strategy FLASH." The report, which isn't publicly available, argued that companies with heavy business exposure to Europe would see their share prices suffer as demand on that continent fell (accordingly, J.P. Morgan had also assigned all of these stocks either a "neutral" or an "underweight" rating). All these stocks generate more than 27% of their sales from the European markets.

Here is how the twelve picks have performed since the beginning of 2012:

Company (Ticker)

YTD Return ex dividends

First Solar (NASDAQ:FSLR)

-61%

PartnerRe (NYSE:PRE)

+15%

Philip Morris International (NYSE:PM)

+13%

Owens-Illinois (NYSE:OI)

-13%

Pall (NYSE:PLL)

-11%

Molson Coors Brewing (NYSE:TAP)

-8%

Mettler Toledo International (NYSE:MTD)

-1%

Qiagen (NASDAQ:QGEN)

+24%

Ansys (NASDAQ:ANSS)

+3%

Biogen Idec (NASDAQ:BIIB)

+30%

Marsh & McLennan (NYSE:MMC)

+1%

Becton, Dickinson and Company (NYSE:BDX)

-6%

Average

-1%

S&P 500

+6%

Overall, an investor would be up by a small margin if they had carried out a pair trade of going long the broader market and shorting the stocks listed by J.P. Morgan. True, nearly the entire gap between a portfolio consisting of these stocks and the S&P 500 is caused by First Solar underperforming the market by 67% and four out of J.P. Morgan's twelve stocks have in fact outperformed the market.

An investor with an attachment to the solar industry may have skipped this pick and ended up with a portfolio roughly even with the market, but the bank still deserves quite a bit of credit. It is also interesting to note that the order in which the stocks were presented by J.P. Morgan, which could possibly indicate the analysts' level of confidence in their underperformance, also mattered: an investor who elected to only short the first six stocks on J.P. Morgan's list would be up about 11% without considering the effect of dividends, as this investor would have picked the four largest losers in the set of stocks while avoiding the two biggest gainers. Let's take a closer look at the stocks with the greatest deviation from market performance.

First Solar drove the strong performance of J.P. Morgan's recommendation to short this group of stocks. J.P. Morgan had warned that over 60% of the company' sales were derived from Europe, and that is essentially the degree to which the stock has fallen since January. While solar industry stocks have dropped this year, First Solar has generally led the declines. In its most recent quarter, it reported revenue losses of over 12% compared to the previous year and has trailing losses per share of $7. Wall Street analysts are still highly bullish, predicting that it will not only turn profits but enough profits to give it a forward multiple of about 4. Lee Ainslie's Maverick Capital owned 3 million shares of the company at the end of March.

Biogen is a large biotechnology firm which J.P. Morgan reported as receiving 34% of its revenue from Europe. In its most recent quarter, revenue was up 18% and earnings were up 34% compared to the same period in the previous year; biotech has generally roared this year, with industry ETFs up between 20 and 30%, but Biogen has outperformed its peers despite its exposure to Europe and recently reached a new 52-week high. The company is priced to continue its strong growth with a trailing price-to-earnings ratio of 27, which is generally above the valuation of other large-cap biotech companies. Andreas Halvorsen's Viking Global owned 3.2 million shares of Biogen at the end of the first quarter and likely made large profits on its investment.

Owens-Illinois manufactures glass containers, and according to J.P. Morgan's report received 41% of its revenue from Europe. This stock has lagged as its trailing earnings are negative and it carries a beta of 2.2, meaning that it tends to overreact to the factors which move the broader market indices. As with First Solar, sell-side analysts expect the company to recover while the market holds the share price at about 6 times forward earnings estimates. Atlantic Investment Management had a position of 8.6 million shares of Owens-Illinois according to its 13F for the first quarter of 2012.

Qiagen provides testing services for DNA analysis and medical conditions. Like Biogen, this company has defied J.P. Morgan's predictions that its European revenue base- 37% of its sales at the time- would decay and drag down the company's stock. Perhaps the bank generally underestimated the resiliency of healthcare-related companies in the European market, as Biogen has outperformed its industry and Qiagen has turned in a strong performance as well. Qiagen's growth in its most recent quarter was modest, but analysts assign it a forward P/E of about 16.

J.P. Morgan's third largest winner- in the sense that the report recommended selling the stock, and it is down double digits versus a slightly up market- is Pall. Pall is a healthcare related manufacturing company that provides filtration and purification products with its largest segment being Life Sciences. J.P. Morgan warned that 39% of the company's revenue came from Europe, with another large share from emerging markets, and surely enough sales in Pall's most recent quarter were flat compared to a year ago. Farallon Capital Management, managed by Thomas Steyer, owned about 900,000 shares of Pall at the end of March.

Source: How Did J.P. Morgan's Recommendations Play Out?