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What Hedge Funds Thinks About These Companies Upgraded By Deutsche Bank

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Global stock markets rallied yesterday on the back of increasing expectations of more policy easing from the Chinese government and strong German trade data that lessens the concerns about a looming global economic slowdown. The Dow Jones Industrial Average was up by over 388 points on Tuesday and is already up by more than 100 points this morning, suggesting that stock markets are ready to resume the longstanding bull run. Therefore, it might be quite opportune to take a look at recent analysts’ upgrades in order to find some buying opportunities in the market. The recent pullback seems to be over, so Deutsche Bank recommends buying higher-quality, large regional banks. In the following article we will discuss Deutsche Bank’s upgrades on the following such stocks: PNC Financial Services Group Inc. (NYSE:PNC), U.S. Bancorp (NYSE:USB), and Wells Fargo & Company (NYSE:WFC).

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At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

To begin with, Deutsche Bank upgraded PNC Financial Services Group Inc. (NYSE:PNC) to “Buy” from “Hold” and maintained its price target at $105. The diversified financial services company expects to reduce expenses by an additional $100 million this year, and Deutsche Bank analysts believe that the company’s management is likely to pursue even more cost-saving efforts. In addition to that, the analysts tracking PNC consider that the bank is not very exposed to capital markets, which should make it less prone to stock market shocks. The shares of PNC are half-a-percent in the red year-to-date, being hit by the recent market pullback. As a result, Deutsche Bank’s price target yields an upside of over 15% from the current price, so potential investors should at least examine this opportunity. Cliff Asness’ AQR Capital Management, one of the largest equity holders of PNC Financial Services Group Inc. (NYSE:PNC), boosted its stake in the bank to 2.37 million shares during the second quarter.

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