CREDIT SUISSE: Everyone else on Wall Street is wrong about these 10 stocks (DPS, KLAC, PDCO, WFM, X, ADS, BIG, CSCO, PGR, VMI)
Sometimes it pays to go against the mainstream.
Betting against the investor consensus can lead to big gains — given you get the trade right.
In an attempt to capture possible market inefficiencies, Credit Suisse compiled their top 10 ideas that go against the mainstream consensus.
"We screened our current US coverage universe to identify companies where our analysts’ views diverged from that of the Street, focusing on rating, earnings projections as well as target price," said the note from Credit Suisse. "To further strengthen the list of stocks, we worked closely with the research analysts to select stories in which our conviction level is high."
Five of the ideas are companies that are currently undervalued, while five are firms with stocks that look too expensive.
We've compiled the 10 ideas along with the price at the time of Credit Suisse's publication, their target price and an excerpt of the analysts explanations as to why they are staking their contrarian claim.
Check them out below.
Dr. Pepper Snapple GroupBy andreasivarsson on Flickr
Industry: Non-Alcoholic Beverages
Current Price: $87.49
Price Target: $108.00
Why Credit Suisse thinks they're right: "In our view, the market is undervaluing the role of the Allied Brands as the primary driver of growth and margins going forward, contributing incrementally to an already consistent financial algorithm. Our sales and EPS estimates are 2% above consensus for FY17/18 as we see a clear opportunity to deliver incremental growth with Allied Brands."
KLA-Tencor Corp.REUTERS/Toru Hanai
Current Price: $71.79
Price Target: $85.00
Why Credit Suisse thinks they're right: "With merger with LRCX formally terminated, we see the stock as attractive on standalone valuations. Our FY17 EPS of $5.34 is ~10% above Street, and we see potential for multiple expansion from here, given premium OpM and 3% dividend yield (with potential for dividend increase)."
Patterson CompaniesPeter Macdiarmid/Getty Images
Industry: Medical Equipment Wholesale
Current Price: $45.36
Price Target: $55.00
Why Credit Suisse thinks they're right: "We believe PDCO is the best play on US dental demand trends, with its predominantly domestic focus and standing as the largest equipment vendor with exclusive access to DENTSPLY SIRONA’s industry leading CAD/CAM lines and other digital offerings. Faster growing animal health revenues now account for over 50% of its revenues, compensating for lumpiness in dental revenue trends."