Caution: Analysts are selling these 5 stocks
The "sell" recommendation is relatively rare on Wall Street. The vast majority of ratings are either "buy" or "hold". Analysts reserve a negative verdict for situations where a company's numbers diverge significantly from its valuation. That's why stocks with a clear consensus to sell deserve attention. The following five stocks are among the least liked in the US market today.
Sell-side analysts (those who issue sell recommendations) have a structurally built-in incentive to stick to positive recommendations. A negative rating complicates access to management, worsens relationships with issuers, and in practice is harder to issue than a neutral or positive one. In the long run, the share of "sell" recommendations in the US market hovers around only five to ten percent of all ratings. So when a consensus of "Sell" or even "Strong Sell" appears on a specific stock, it's a signal worth taking seriously.
Key points
A sell rating is one of the rarest recommendations on Wall Street. Despite that, the following 5 stocks have landed on the list of names analysts are steering clear of.
One of them has not a single buy recommendation. Its numbers show a problem that sales growth alone will hardly solve.
Not even a dividend yield over 20% convinced analysts. Analyst recommendations remain strongly negative.
Are analysts right, or is there an opportunity hiding among the hated stocks? For some of these five, the market already disagrees with their negative verdict.
At the same time, an important caveat applies that most lists of worst-rated stocks omit. For smaller and less-covered companies, the consensus often consists of a single analyst. Statistically, that's not a consensus, but one opinion with a lot of weight.
A closer look shows that the five stocks analyzed today fall into three different categories. The first is a company whose business model has not yet proven an ability to generate cash. The second consists of companies where accounting profit was temporarily inflated by one-time items that the market hasn't noticed yet. The third category is high-yield growth where the payout to shareholders exceeds what the business actually earns. So which stocks are worth watching right now?