An analyst’s call can be a major catalyst for movement in a stock. In the past I have written in detail about such subjects, as a call can often create a domino effect of revised outlooks and either buying or selling of a stock. In this piece I am looking at four stocks that traded with excessive volatility thanks to the notes issued by analysts; these are calls worth noting.
| Company | Ticker | Firm | Call |
| RF Micro Devices, Inc. | (NASDAQ:RFMD) | Raymond James | Market Perform |
| VeriFone | (NYSE:PAY) | Piper Jaffray | Neutral |
| Pioneer Southwest Energy | (NYSE:PSE) | UBS | Sell |
| BHP Billiton | (NYSE:BHP) | Citigroup | Neutral |
Perhaps no analyst was harsher than Raymond James on Thursday, when the firm downgraded the entire industry of RF chipmakers, specifically RF Micro Device. The firm cited increased competition and weak margins as a contributor to its call, yet the firm is alone with such a low rating on the stock.
Strangely enough, this downgrade came as QUALCOMM, Inc. (NASDAQ:QCOM) introduced a new RF front-end solution featuring a 3D package. As a result, the analyst is correct, this is quickly becoming a congested space, and the stock might be due for a significant correction.
VeriFone Systems Inc (NYSE:PAY)
It was a busy day for analysts who cover VeriFone, as the stock led the market in losses with 42.8%. The large loss came as a result of very weak guidance and a warning for both a massive revenue and EPS miss for the current quarter.
Therefore, analysts could not downgrade the stock quickly enough. They are showing concern regarding the company’s exposure to Europe, lost revenue opportunities, and weak South American sales. I think SunTrust said it best: “We are simply at a loss to explain such a huge miss,” a miss that was of epic proportions.
As a result, I would not touch this stock, as it looks like this fundamental decline could be steep.
Pioneer Southwest Energy Partners L.P. (NYSE:PSE)
Pioneer Southwest fell by almost 4% on Thursday as UBS cut the stock from Neutral to Sell. The firm noted a number of reasons for the bearish outlook, including: long-lived slow-decline assets, an oil-directed drilling program, and balanced commodity exposure.
The firm brings about very valid concerns, yet investors must remember to stay balanced and also weigh the positives. This is a company that is seeing unit gains of 11% in 2013, returns a yield over 8%, and is quite cheap with a P/E ratio at 8.0. Therefore, I think this downgrade might have presented opportunity for many investors.
BHP Billiton Limited (ADR) (NYSE:BHP)
The mining company BHP Billiton was downgraded to Neutral on Thursday after Citigroup noted a number of challenges that the company and its new CEO will face over the next year. The firm believes that all positive catalysts such as cost cuts are priced into the stock.
Furthermore, the firm notes a slower rate of growth in China and reverting prices could have a negative impact on the stock. Currently, the company is seeing a decline in sales and is expected to see earning losses over the next year.
While the company does return a 3% dividend in 2013, I also believe there are too many questions and that there are much better selections in the market.
Conclusion
In my book, Taking Charge With Value Investing (McGraw-Hill), I examine human behavior and the psychological effects that take place in the minds of investors when a stock shoots higher or falls drastically lower (think roulette at a casino). For many investors, chasing these trends is common, even addicting, and very few are capable of realizing their losses because of their occasional gain. Investors need to avoid this behavior, and not look at the performance and then the news, but rather assess the valuation of a stock and then take into consideration the opinions of the analyst. By doing so, you will be able to find the inconsistencies and a distinction between performance and fundamentals, which creates value and allows for large returns.
The article Four Noteworthy Analyst Calls originally appeared on Fool.com and is written by Brian Nichols.
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