Are Analysts Overlooking These 3 Stocks?

Hasbro, Inc. (NASDAQ:HAS), 3M Co (NYSE:MMM), and Seagate Technology PLC (NASDAQ:STX) are underappreciated by analysts, despite their strong technical performances

by Kirra Fedyszyn

Published on Mar 30, 2016 at 3:31 PM

Analyst rankings can have a measurable effect on the performance of stocks, as traders tend to scoop up recently upgraded stocks (and vice versa for recently downgraded equities). As contrarians, we live to find uptrending stocks not yet on analysts' radar, as this leaves room for bullish brokerage notes. Among the outperforming stocks still surrounded by pessimism, according to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, are toymaker Hasbro, Inc. (NASDAQ:HAS), blue-chip consumer products specialist 3M Co (NYSE:MMM), and tech stock Seagate Technology PLC (NASDAQ:STX).

HAS is ahead more than 16% year-to-date, up 0.3% at $78.47 today. The stock has advanced more than 24% in the past year, hitting a record high of $84.42 last July, before pulling back to test its 80-week moving average. And while HAS has gained more than 25% since 2012, the number of "buy" ratings has dwindled to 20% from 63.6%, according to White. 

Option traders have been pessimistic lately, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HAS' 10-day put/call volume ratio of 1.11 ranks higher than 81% of all readings in the past year. Plus, the short interest on the stock would take about a week and a half to cover, at HAS' typical daily volume. An unwinding of bearish sentiment in and out of the option pits could help send Hasbro, Inc. (NASDAQ:HAS) to a new peak.

MMM has staged an impressive rebound since its late-January low -- adding back about 23% -- and is now within striking distance of its March 2015 record high, up 1.6% at $166.94 today. But while the shares have recovered over the past two months, option traders are only beginning to back off their bearish bets, with MMM puts bought to open at nearly twice the rate of calls over the last 10 days on the ISE, CBOE, and PHLX.

And of the 14 brokerage firms providing coverage, five -- or 35.7% -- rate 3M Co (NYSE:MMM) a "buy" or better. In 2012, MMM sported 57.1% "buy" ratings, even though the security was roughly 18% lower than right now. But we could be seeing the beginning of a turnaround in analyst sentiment -- Morgan Stanley, Bernstein, and UBS each raised their price targets on the stock today, with UBS offering the highest target -- well into record-high territory -- at $190.

STX hit a three-year low of $26.25 in January, but has been on a steady rebound since, up 1.5% to $34.32 today, after bouncing off support at its formerly resistant 80-day moving average. But although the equity has rallied more than 18% since 2012, the number of "buy" ratings has dwindled. Now, 72% of analysts rate STX a "hold" or worse, compared to not even 50% four years earlier -- making STX a prime target for future upgrades.

Short interest on the stock is also elevated, representing 11.2% of its total float, or nearly seven days' worth of trading, at STX's average pace. And on the ISE, CBOE, and PHLX, the security's 10-day put/call volume ratio of 1.78 is in the 84th bearish percentile of its annual range. Should analysts, short sellers, or option traders back off of their pessimistic positions, Seagate Technology PLC (NASDAQ:STX) could extend its 2016 uptrend.

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