3 Stocks Upgraded On September 20 To Consider

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 |  Includes: KGC, LSE, PNK
by: Jorge Aura

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 that were upgraded on September 20, and I chose the top three companies with a change on ratings.

These significant changes are:

  • Caplease, Inc. (NYSE:LSE) changed its rating from hold to buy.
  • Kinross Gold Corporation (NYSE:KGC) changed its rating from hold to buy.
  • Pinnacle Entertainment, Inc. (NASDAQ:PNK) changed its rating from outperform 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. Caplease, Inc. operates as a real estate investment trust (REIT), focused on financing and investing in commercial real estate that is net leased primarily to single tenants with investment grade or near investment grade credit ratings. It provides private and corporate owners of net lease real estate with equity, debt, and mezzanine financing options. The company is organized to qualify as a REIT for federal income tax purposes and accordingly it distributes at least 90% of its taxable income to its stockholders.

Chart Analysis

Click to enlarge

- The MACD marks a change of downward trend. RSI marks an overbought. The stock is in a bullish channel.

New Rating

KeyBanc upgraded CapLease from Hold to Buy with a price target of $6.50.

Analyst at KeyBanc said:

LSE has significantly de-risked the story over the past 18 months (i.e., reduced leverage and simplified the structure with the sale of the CDO business) and has shifted from offense to defense. The Company has sourced accretive deals that are focused more on long-term real estate values while trying to maintain an investment grade tenant roster. In addition, the recent pricing on the Realty Income/American Realty Capital merger (i.e., 5.9% cap rate) highlighted the downward trajectory of cap rates for triple-net assets with credit tenants and remaining

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

The company reported the second-quarter results on August 7 with the following highlights:

Revenue $39.69 Million
Net Income ($8.86 Million)
Cash $25.78 Million
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Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 2,446,869 148,913 16.431534
8/15/2012 2,451,912 207,125 11.837837
7/31/2012 2,452,420 143,200 17.125838
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My Fundamental and Chart Analysis

The stock has a $6 price target from the Point and Figure chart. The short interest shows no changes. The stock is trading at a forward P/E of 87.67. There have been one insider buying transactions this year. The MACD marks an downward trend and for this reason, I would purchase shares in the range of $5-$5.10.

2. Kinross Gold Corporation together with its subsidiaries, engages in mining and processing gold ores. It is also involved in the exploration and acquisition of gold bearing properties. The company’s gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Ecuador, Chile, Ghana, and Mauritania. As of December 31, 2011, its proven and probable mineral reserves included 62.6 million ounces of gold, 84.9 million ounces of silver, and 1.4 billion pounds of copper.

Chart Analysis

Click to enlarge

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

New Rating

TD Securities upgraded Kinross Gold from Hold to Buy with a price target of $13.50 (from $9.00).

Greg Barnes, analyst at TD Securities, said:

We will be the first to admit that this is something of a call on a new, untested CEO and that our view is helped by our higher gold price deck. That being said, we also believe that the worst is behind the company with respect to re-setting expectations for the Tasiast project, that investors are placing little to no value on the FDN or Lobo Marte projects and that the company has a respectable base of existing production (~2.5 Mozs/yr at $700/oz cash costs) and a strong liquidity position (available liquidity of ~$3.9 billion).

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

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

Revenue $1 Billion
Net Income $156 Million
Cash $270.5 Million
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Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 5,381,969 7,350,855 1.000000
8/15/2012 4,670,880 11,326,767 1.000000
7/31/2012 4,353,903 7,694,582 1.000000
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My Fundamental and Chart Analysis

The stock has a $11.25 price target from the Point and Figure chart. The stock is trading at an incalculable forward P/E. I would buy a small speculative position because the stock is bullish and the recent "upgrade" recommendation will help overcome the $15.95 target price (52 weeks high)

3. Pinnacle Entertainment Inc owns, develops, and operates casinos, and related hospitality and entertainment facilities in the United States. It operates casinos, such as L’Auberge Lake Charles in Lake Charles, Louisiana; River City Casino and Lumière Place Casino, and Hotels in St. Louis, Missouri; Boomtown New Orleans in New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; and Boomtown Bossier City in Bossier City, Louisiana. The company also operates River Downs racetrack in southeast Cincinnati, Ohio. The company was formerly known as Hollywood Park, Inc. and changed its name to Pinnacle Entertainment, Inc. in February 2000.

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

CLSA upgraded Pinnacle Entertainment from Outperform to Buy with a price target of $14.70 (from $13.00).

Fundamental Analysis

Consensus Recommendation

(SOURCE)

Financials

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

Revenue $298.31 Million
Net Income $11.95 Million
Cash $202.80 Million
Click to enlarge

Short Interest

Settlement Date Short Interest Avg Daily Share Volume Days To Cover
8/31/2012 4,111,127 461,673 8.904846
8/15/2012 3,484,538 475,700 7.325075
7/31/2012 2,620,440 529,077

4.952852

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My Fundamental and Chart Analysis

The stock has a $13.50 price target from the Point and Figure chart. Short interest has increased in a month. The stock is trading at a forward P/E of 18.30. There have been five insider buying transactions this year. 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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors buy and/or sell at their own risk. I declare that I may day-trade any stock at any time mentioned in this article. For me "long" is until I sell and few tell you that. I do not "short" stocks and few tell you that too. I also get paid one penny per view from SA and other than being published by SA and my own private stock account, I have zero connection to Wall Street and few tell you that too.