Three Market Moving Calls Worth Noting: Bonanza Creek Energy Inc. (BCEI), Hewlett-Packard Company (HPQ)

Valuation call moves stock that lacks value

The controversial company Intuitive Surgical Inc. (NASDAQ:ISRG) saw a 4.50% pop on Monday as Canaccord called the stock cheap and upgraded it to “Buy.” Over the last month the stock has fallen by 15.5% due to questions regarding its robotic devices. However, the firm now believes that expectations have been lowered enough to where fundamental growth exceeds the valuation, using the PEG ratio as the determining factor to validate its “buy” rating.

Most good value investors know that when a stock trends higher, it almost always continues until being overvalued, and when it trends lower, it will reach a point of extreme value. Therefore, with the rumors surrounding this company, and with the stock trading at 30 times earnings, I don’t think that level has been reached. I don’t know what will come of the questions surrounding the company’s machines, but if perception is on the downtrend, then I suspect its stock will continue to fall as well. Bottom line: I think there is too much risk at this time.


In my book, “Taking Charge With Value Investing (McGraw-Hill, 2013)” I thoroughly discuss how to assess the opinions of analysts, and how to use them to your advantage. Typically, there are two types of calls, those that “follow the trend” and those who call “regardless of the trend”. It is important to distinguish between these two groups, and to not follow the performance that a call creates, but rather read and incorporate the notes as part of your research. Then, when you are able to find inconsistencies between value and valuation you will be better prepared to capitalize on the opportunity.

The article Three Market Moving Calls Worth Noting originally appeared on and is written by Brian Nichols.

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