Stock prices can be depressed for prolonged periods of time. Investing in these out of favor stocks might be extremely profitable if investors aren’t too early. Insider Monkey, your source for free insider trading data, compiled the list of 27 stocks that had negative returns during the past 12 months but are currently favored by Wall Street analysts and hedge funds.
The analysts’ target prices are sourced from Bloomberg. The stocks are ranked based on the expected 12-month gain in stock prices. Some of these out of favor stocks have already started to take off and have had significant returns so far in 2011. Micron (MU) and RRD are among these names, but most of the other stocks have negative returns this year. Here are analysts and hedge funds’ favorite out of favor stocks:
| Company | Ticker | Last Price | Analysts’ Target | No of Hedge Funds |
| BANK OF AMERICA | BAC | 12.42 | 18.12 | 42 |
| SOUTHWEST AIR | LUV | 11.55 | 16.75 | 8 |
| CISCO SYSTEMS | CSCO | 16.73 | 23.34 | 33 |
| GOOGLE INC-CL A | GOOG | 526.84 | 734.32 | 43 |
| MICRON TECH | MU | 10.42 | 14.48 | 13 |
| HEWLETT-PACKARD | HPQ | 39.75 | 54.35 | 25 |
| MICROSOFT CORP | MSFT | 25.08 | 33.68 | 50 |
| RR DONNELLEY & | RRD | 18.84 | 25 | 10 |
| CITIGROUP INC | C | 4.42 | 5.74 | 56 |
| CARNIVAL CORP | CCL | 37.55 | 48.42 | 18 |
| INTEL CORP | INTC | 19.62 | 25.18 | 17 |
| US STEEL CORP | X | 50.49 | 64.57 | 9 |
| AFLAC INC | AFL | 51.58 | 65.77 | 10 |
| BEST BUY CO INC | BBY | 29.22 | 36.94 | 15 |
| VISA INC-CLASS | V | 75.68 | 95.65 | 24 |
| ROBERT HALF INT | RHI | 29.22 | 36.91 | 5 |
| MEDCO HEALTH SO | MHS | 55.97 | 70.57 | 17 |
| CORNING INC | GLW | 19.49 | 24.53 | 12 |
| STAPLES INC | SPLS | 20.09 | 25.27 | 10 |
| GANNETT CO | GCI | 15.39 | 19.33 | 12 |
| METLIFE INC | MET | 43.37 | 54.45 | 10 |
| STATE ST CORP | STT | 44.67 | 56 | 17 |
| TARGET CORP | TGT | 50.27 | 62.76 | 19 |
| INTL GAME TECH | IGT | 15.87 | 19.58 | 10 |
| DR HORTON INC | DHI | 11.67 | 14.31 | 12 |
| FEDEX CORP | FDX | 91.96 | 112.29 | 19 |
| AMGEN INC | AMGN | 55.22 | 66.12 | 13 |
Bank of America tops the list with an expected 46% return in the next 12 months. Nearly a quarter of the 175 hedge funds we follow had large positions in BAC at the end of December. John Paulson’s Paulson & Co and Bruce Berkowitz’s Fairholme each had more than $1 Billion invested in BAC. Citigroup is the only other banking stock that is at the top of the list.
The top of the list is dominated mainly by mega-cap technology stocks. Cisco, Google, Hewlett-Packard, Microsoft, and Intel are extremely favored by hedge funds and Wall Street analysts. All of these stocks are among the 12 technology stocks that hedge funds love. Unfortunately all of them had negative returns so far in 2011.
We believe these 27 stocks as a group have value characteristics and will outperform the market over the next year or two.
