NEW YORK — Wall Street's lowest-rated stocks have turned into this year's best performers — a sign that analysts who underestimated the economy will boost their recommendations and trigger even bigger gains in equities.

• Huntington Bancshares Inc., the regional lender in Columbus, Ohio, had twice as many "sell" ratings as "buys" in December. It jumped 66 percent this year for the fourth-largest advance in the Standard & Poor's 500 Index.

• Eastman Kodak Co. and Sunoco Inc. have gained more than 20 percent after more than 30 percent of the analysts covering them at the start of the year recommended getting rid of the shares.

Companies most dependent on growth have the highest proportion of "sell" ratings, even as economists predict the fastest expansion since 2004. Banks, property developers and automakers rallied 12 percent on average this year.

Investors say the bears will capitulate, providing the next catalyst for more stock gains.

At least 11 analysts have raised their rating on PNC Financial Services Group Inc. to "buy" this year as the Pittsburgh-based lender gained 19 percent. The 50 companies in the S&P 500 that had the most upgrades to "buy" have risen 11 percent on average this year, compared with a 1.7 percent advance for those with the most downgrades to "sell," according to data compiled by Bloomberg.

"The best kind of company to own is the one where the vast majority of analysts are negative — but you see things turning around," said Thomas Wilson, managing director of the institutional investments and private-client group at Brinker Capital, which manages about $9 billion from Berwyn, Pa. "I don't really want to own the stock that has nothing but favorable ratings because the expectations are so high."

In December, analysts were most optimistic on industries whose profits are least tied to economic growth, according to data compiled by Bloomberg. Those shares, however, have trailed the S&P 500 after economists in January boosted their projections for GDP expansion to 3.2 percent from 2.7 percent, the data show.

Coca-Cola Co., the world's largest soda maker, had 14 "buys" and 1 "sell" rating in December and has lost 8.2 percent this year, based on data compiled by Bloomberg.

More than 52 percent of recommendations for S&P 500 pharmaceuticals, computer companies and food producers were bullish. Pfizer Inc., the world's largest pharmaceutical, is down 16 percent this year — even after 81 percent of analysts covering the New York-based firm said investors should buy shares, according to data compiled by Bloomberg from the end of last year.

Wall Street was most bearish on groups whose earnings fell the furthest in the recession, but now have risen — banks, which gained 12 percent this year; property developers, up 14 percent; and automakers, which rose 10 percent, the data show. Real estate stocks have rallied on signs that household wealth is rebounding and that the Federal Reserve will keep benchmark interest rates at a record low until next year.

"The crowd tends to get you off into the wrong area at the wrong time," said Barry James, who manages $2 billion as chief executive officer for James Investment Research Inc. in Xenia, Ohio. "When the analysts are all on board saying only good things can happen, it's already built into the price. There's not a lot of upside left."

Bearish ratings signal a company or industry face above-average risk and are reasons for investors to sell, said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati.

Four of the thirteen analysts covering Denver-based ProLogis told investors to sell the shares in December. The world's biggest owner of warehouses has since fallen 16 percent this year after saying on April 22 that slack demand for storage pushed funds from operations down 90 percent in the first quarter.

"You shouldn't be blinded by these huge stock moves," Wirtz said. "If there's a preponderance of sell ratings on a particular stock, logic would suggest that there must be reasons for the dislike, real fundamental challenges."

Analysts were most pessimistic on a group of 16 lenders in December, with "sell" ratings making up 17 percent of the industry's recommendations -- the highest proportion among 24 industries in the S&P 500 -- according to data compiled by Bloomberg. The advice backfired as the measure rallied 12 percent this year, led by an 87 percent surge in Salt Lake City-based Zions Bancorp.

"Sell" ratings for real estate companies and automakers in the S&P 500 accounted for 13 percent and 14 percent, respectively, of the total in December, Bloomberg data show.

Copyright ©2025— Trib Total Media, LLC (TribLIVE.com)