3 Notable Large-Cap Upgrades: Anheuser-Busch InBev NV (ADR) (BUD), Target Corporation (TGT), Walgreen Company (WAG)

Target is usually compared to Wal-Mart Stores, Inc. (NYSE:WMT) due to the similarities between the two business models. Therefore, I find it interesting that Target is near equal on a price/sales basis to Wal-Mart and is also expecting better bottom level growth in 2013 and trades with a lower forward P/E ratio. Additionally, Target Corporation (NYSE:TGT)’s operating margins are slightly better and it is seeing greater top-line growth compared to Wal-Mart. Therefore, I find this downgrade, on a valuation basis, somewhat odd, and believe that Target is in fact still a Buy.

Conclusion

In my book, Taking Charge With Value Investing (McGraw-Hill), I examine human behavior and the psychological effects that take place in the minds of investors when a stock shoots higher or falls drastically lower (think roulette at a casino), such as after an analyst’s call. For many investors, chasing these trends is common, even addicting, and very few are capable of realizing their losses because of their occasional gain.

Investors need to avoid this behavior after a call, and look not at the performance of the stock but rather the performance of fundamentals. By doing so, you will be able to find the inconsistencies and a distinction between performance and fundamentals, which creates value and allows for large returns.

The article 3 Notable Large-Cap Upgrades originally appeared on Fool.com and is written by Brian Nichols.

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