Wall Street Loves These Stocks. Should You?
Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?
Not so fast! With help from the 180,000 members of Motley Fool CAPS, we'll see whether these highflying favorites deserve analysts' unwavering support.
CAPS Rating (out of 5)
CAPS Bullish Sentiment
No. of Wall Street Analysts
52-Week Price Change
|3M (NYS: MMM)||*****||97%||29||(9%)|
|Freeport-McMoRan (NYS: FCX)||****||97%||25||(18%)|
Source: Motley Fool CAPS.
As you can see, there's a wide range of results, so Wall Street may love 'em, but that doesn't mean you have to. Use the list as a jumping-off place for your own research.
No generic opportunity
Although 3M's entrance into the natural gas industry seems like an odd development -- what Peter Lynch might refer to as "deworsification" -- the closer you look, the less strange it seems.
Although best known for its Post-It Notes brand and Scotch Tape, 3M has a highly developed segment of industrial products and materials, particularly for the transportation industry, that makes its pairing with Chesapeake Energy (NYS: CHK) for the development of an advanced gas tank for natural gas vehicles almost a natural extension. With nat-gas prices so low, the proliferation of the alternative energy source is likely to gain broader distribution.
What Westport Innovations (NAS: WPRT) is doing for natural gas engines, 3M hopes to achieve greater efficiencies with the tank, which it notes is, surprisingly, one of the most expensive components of a CNG vehicle.
This of course bars an amazing move by 3M, perhaps a stunning new product. But for a $61.4B market cap company, such a product would have to add A LOT to the bottom line to make an impact. If the price of the stock were at $68.63, as it was on Oct. 4, I would strongly consider buying such a great company. But with [it having] such a high valuation, I doubt that it can outperform the market.
Does the "natural-gas gas tank" qualify as a stunner? Tell us in the comments section below or on the 3M CAPS page if you think it's time to fill up your portfolio with its stock, then add 3M to your Watchlist to see if this isn't as odd of a pairing as it seems.
Going for the win
The world economy is turning sour once again. Yesterday the markets sold off over concerns that bailing out Greece won't work, and a day after China cut its growth forecast, it's become all but certain Europe will be plunging into a second recession.
Those are indications that materials companies like copper and gold miner Freeport-McMoRan might come in for a rough patch if demand for its output is reduced. Heavy-equipment manufacturers like Joy Global and Caterpillar (NYS: CAT) , both of which are also counting on continued international economic expansion, would also be affected by a worldwide slowdown.
Yet some analysts think China is attempting to reflate its assets through central banking policies, which would be a boon for commodities sellers like Freeport. It might make for a bigger hangover later on, if history is any guide, but the immediate effect would cause demand for copper to jump. Freeport, which runs the huge Grasberg mine in Indonesia, sells much of its copper output to China and so would be a prime beneficiary. China accounted for only 4.5% of Freeport's revenues last year, but with the country consuming 40% of the world's copper, it is currently the biggest market around.
CAPS member F23 acknowledges the relationship between the copper giant and the world's economy, but thinks that bodes well for the miner, and he's rated Freeport to outperform the market.
Volatile. Moves with news about overall economic activity in USA and China. As economies improve FCX prices moves higher.
Add Freeport to the Fool's free portfolio tracker to see whether it can dig up new momentum, and let us know in the comments section below or on the Freeport-McMoRan CAPS page if you think the stock, which currently trades 32% off its 52-week highs, has a rich patina.
Agree to disagree
Tell us whether these stocks deserve to have Wall Street marching lockstep, but then check out The Motley Fool's new free report that highlights a company breaking all the rules on its way to huge, multiple-bagger gains. The report is free, so get a copy today!
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold and Joy Global.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy, 3M, and Westport Innovations; and creating a diagonal call position in 3M. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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