Western Refining, Inc. (WNR), Intuitive Surgical, Inc. (ISRG): Four Analyst Upgrades that I Would Not Chase

Sequenom

Piper Jaffray joined seven other analysts with bullish ratings on shares of Sequenom. The firm raised its price target to $6.50, which then pushed shares 6.08% higher on Friday. Jaffray, like other analysts that cover the stock, believe there is great long-term value in the DNA detection and sequencing equipment company.

The company is among the smallest of those in the space, yet is growing rapidly at more than 60% year-over-year. Jaffray believes that this growth will continue and that margins will improve.

My concern is margins, as the company has a profit margin of (148.9%) despite strong growth. I am not sure when profitability will be achieved and wonder if this will become the next Dendreon, a fast-growing unprofitable company. Therefore, I would not chase this upgrade until signs of profit are evident.

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). 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, and not look at the performance and then the news, but rather assess the valuation of a stock and then take into consideration the opinions of the analyst. 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 Four Analyst Upgrades that I Would Not Chase originally appeared on Fool.com and is written by Brian Nichols.

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