Equities have rebounded in trading today following the sell-off on Tuesday. Investors though remain anxious due to uncertainty over when the Federal Reserve will hike benchmark interest rates. The focus today though has shifted from the Fed to the oil market. U.S. crude fell sharply today ahead of the release of inventory data. Oil prices are expected to remain volatile ahead of the OPEC meeting later in the month. This along with the Fed is likely to keep equity markets under check as well.
As markets have dropped from their record high levels and with the Fed indicating a hawkish turn, stock picking will become even more important than before. Indeed, equity investing was easier when the market was driven by the excess liquidity provided by the Fed. Keeping an eye on analyst updates is a good way to screen for stocks. In this article, we will take a look at five stocks that has seen their ratings upgraded or downgraded by different analysts. The stocks in question are: Cognizant Technology Solutions Corp. (NASDAQ:CTSH), Freeport-McMoran Inc. (NYSE:FCX), Gilead Sciences Inc. (NASDAQ:GILD), Atwood Oceanics Inc. (NYSE:ATW), and VimpelCom Ltd. (ADR) (NASDAQ:VIP).
An everyday investor doesn’t have the same resources and capabilities to analyze different publicly-traded companies as hedge funds do. This is why it is a good idea to see what stocks hedge funds like the most and try to imitate some of their bullish moves in an attempt to reap market-beating returns. At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas. In our backtests, a portfolio of the 15 most popular small-cap stocks generated monthly alpha of 81 basis points, versus 0.7 percentage points posted by hedge funds’ top large- and mega-cap picks (see more details here).
Cognizant Technology Solutions Corp. (NASDAQ:CTSH) saw its rating downgraded by analysts at Credit Agricole SA. The analysts downgraded the stock to ‘Underperform’ from ‘Outperform’. They also lowered the price target on the stock from $70 to $60. It has been a disappointing year for Cognizant Technology so far, with its stock falling by more than 8.5%, year-to-date. Over the last five years though, Cognizant Technology has generated returns of more than 80%. Among the funds we track, 40 held $922.47 million worth of Cognizant Technology Solutions’ shares at the end of June, compared to 38 funds with stakes worth $801.49 million in aggregate a quarter earlier.
A number of analysts issued updates on Freeport-McMoran Inc. (NYSE:FCX)’s after the company announced an agreement to sell its Deepwater Gulf of Mexico properties to Anadarko Petroleum Corporation (NYSE:APC) for total cash consideration of $2 billion and up to $150 million in contingent payments. Deutsche Bank maintained its ‘Hold’ rating on the stock, but cut the price target to $12 from $12.50, while Morgan Stanley downgraded the stock to ‘Underweight’ from ‘Equal Weight’ and lowered its price target to $7 from $9. In addition, analysts at Macquarie lowered their price target to $10 from $13 reaffirming their ‘Neutral’ rating. However, not all analysts though gave a thumbs down to the deal, as analysts at Cowen said in a note that the assets were a major overhang for Freeport-McMoran shares and therefore the closure of the transaction represents a positive development for the company. Yesterday, Cowen reaffirmed its ‘Buy’ rating and $15 price target on the stock. The move was also lauded by billionaire Carl Icahn, one of Freeport-McMoRan’s biggest shareholders. Freeport-McMoRan has seen the number of funds from our database long its stock drop to 34 from 30 during the second quarter. These funds held $1.52 billion worth of Freeport-McMoRan shares, which represented to 10.90% worth of the company’s shares at the end of June.
Read about the latest analyst action surrounding the other three stocks on the next page.