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Speculating on companies that have recently changed their ratings can be a good short-term strategy. Normally, companies will see increases in their prices after these changes. The ratings are updated daily and can therefore change daily. They can change because of a change in the analyst's estimate of the stock's fair value, a change in the analyst's assessment of a company's business risk, or a combination of any of these factors.

I assessed companies which were upgraded on September 19, and I chose the top three companies with a change on ratings.

These significant changes are:

  • Achillion Pharmaceuticals (ACHN) changed rating from underperform to buy.
  • Vascular Solutions (VASC) changed rating from neutral to buy.
  • LG Display (LPL) changed rating from hold to buy.

These ratings are a way to qualify how the analyst views the potential for stock price appreciation. When an analyst changes his/her rating, the security's price may change. This depends on how close investors follow the analyst's recommendations. An upgrade generally tends to increase the price while a downgrade does the opposite. However, it is not only the change but the reason for the change that is important to understand.

These three stocks are valued for the change from hold to buy. It is considered a very significant change because ratings had remained static for a long time. This change has to strongly favor the valuation of the companies mentioned above as well as the vision of future investors. Normally, these changes for the better are due to lower debt and improvement of the companies' cash. These are two keys to perform a follow-up or think in a purchase of these stocks.

Here is a look at the three stocks:

1. Achillion Pharmaceuticals Inc. is an innovative biopharmaceutical company dedicated to bringing important new treatments to patients with infectious disease. The Company's highly skilled and experienced discovery and development teams have advanced multiple product candidates with novel mechanisms of action. Achillion is focused on solutions for the most challenging problems in infectious disease - HCV and resistant bacterial infections. Achillion sees significant competitive advantages in developing anti-infective drugs compared to developing drugs in other therapeutic areas. The emergence of drug resistance seen with current antiviral and antibacterial therapies creates a continuing need for new drugs, providing a large and growing potential business opportunity.

Chart Analysis


(Click to enlarge)

- The MACD marks an upward trend. RSI marks an overbought. The stock is in a bullish channel.

New Rating

BofA/Merrill Lynch upgraded Achillion Pharmaceuticals from Underperform to Buy

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

The company reported the second-quarter results on August 8 with the following highlights:

Revenue $0
Net Income ($11.52 Million)
Cash $18.26 Million

Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 11,506,014 923,495 12.459206
8/15/2012 11,571,993 871,693 13.275308
7/31/2012 10,976,374 511,643 21.453189

My Fundamental and Chart Analysis

The stock has a $10.5 price target from the Point and Figure chart. The short interest shows an increase. There have been one insider buying transactions this year. The MACD marks an upward trend and for this reason, I would purchase shares with a target price of $10.5.

2. Vascular Solutions Inc. develops solutions for interventional cardiologists and interventional radiologists worldwide. Its catheter product line include Accumed wrist positioning splint designed to position and stabilize the hand, wrist, and forearm for arterial puncture and support during radial artery catheterization; and Pronto V3 and Pronto V4 catheters to remove blood clots, Pronto-Short for use in clotted dialysis grafts, Pronto 035 for large vessels, Pronto LP for smaller vessels, QXT extraction catheters, Langston dual lumen pigtail catheters to measure intravascular pressure gradients, and Twin-Pass dual access catheters to access discrete regions of arterial vasculature.

Chart Analysis


(Click to enlarge)

- The MACD marks an upward trend. The stock is in a bullish channel. RSI is in a good position.

New Rating

Sidoti upgraded Vascular Solutions from Neutral to Buy.

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

The company reported the second-quarter financial results on July 23 with the following highlights:

Revenue $24.73 Million
Net Income $2.38 Million
Cash $10.95 Million

Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 530,608 64,578 8.216544
8/15/2012 588,965 91,796 6.416020
7/31/2012 577,207 72,792 7.929539

My Fundamental and Chart Analysis

The stock has a $14.12 price target from the Point and Figure chart. There have been ten insider selling transactions this year. The stock is trading at a forward P/E of 22.3. I would buy a small speculative position because the stock is bullish and the recent "upgrade" recommendation will help overcome the $14.12 target price (52 weeks high)

3. LG Display engages in the manufacture and sale of thin film transistor liquid crystal display (TFT-LCD) panels in the Republic of Korea, the United States, Europe, China, and rest of Asia. It offers TFT-LCD large-sized panels for use in televisions, notebook computers, and desktop monitors; and small-sized panels for other application products, such as mobile phones and tablet personal computers. The company also provides panels for industrial and other applications, including entertainment systems, automotives, portable navigation devices, e-books, digital photo displays, and medical diagnostic equipment. In addition, it offers organic light emitting diode and flexible display products.

Chart Analysis


(Click to enlarge)

- The MACD marks an upward trend. The stock is in a bullish channel. RSI marks an overbought.

New Rating

Topeka Capital upgraded LG Display from Hold to Buy with a price target of $16.15.

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

The company reported the second-quarter financial results on July 26 with the following highlights:

Revenue KRW6.910 Billion
Net Income (KRW111 Billion)
Cash KRW147 Billion

Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 3,409,946 372,171 9.162310
8/15/2012 3,563,280 372,149 9.574875
7/31/2012 3,904,535 500,702

7.798121

My Fundamental and Chart Analysis

The stock has a $13.67 price target from the Point and Figure chart. Short interest has decreased in a month. I would buy a small speculative position because the MACD marks an upward trend and the recent "upgrade" recommendation.

*Chart data sourced from stockcharts, all other data sourced from Nasdaq.com and yahoo.com as well as the webs of the previously mentioned companies.

Source: 3 Stocks Upgraded On September 19 To Consider