If there is one thing Wall Street has been guilty of over the years, it is a sort of herd mentality. This that leads to “overcrowded” trades, where everybody is long the same stocks. A recent research note from SunTrust Robinson Humphrey highlights some outstanding stocks that are way out of consensus at Wall Street firms and by portfolio managers at mutual funds and hedge funds.
We screened the most out-of-consensus stocks for market cap and liquidity. Some of the stocks were surprising, as they would not seem to be out of favor by analysts and portfolio managers. Here are three we zeroed in on: Eli Lilly & Co. (NYSE: LLY), Allscripts Healthcare Solutions Inc. (NASDAQ: MDRX) and Vantiv Inc. (NYSE: VNTV).
Eli Lilly
This huge pharmaceutical leader is surprisingly out of consensus with portfolio managers at mutual funds and hedge funds, or what is known as the buy side. It also has more Neutral ratings than Buy ratings on Wall Street.
The company easily beat analysts’ earnings expectations for the first quarter, reporting earnings of $0.87 per share, which topped guidance by 11 cents per share. Revenues for the period declined 1% to $4.65 billion, but they were still enough to top analysts’ $4.63 billion expectations.
While generic competition is eating into profits with the company’s Cymbalta and Evista drugs, and currency headwinds took a toll on overseas sales, the drug giant still affirmed forward expectations.
Eli Lilly shareholders are paid a solid 2.8% dividend. The consensus price target for the stock is $77.59. Shares closed Friday at $71.58 apiece.
ALSO READ: 4 Big Pharmaceutical Stocks to Buy for the Rest of 2015
Allscripts
This is another health care stock that the buy side in not very enamored with. Wall Street firms also have more Neutral than Buy ratings on the stock. Allscripts is a leader in health care information technology solutions that advance clinical, financial and operational results. The company’s solutions connect people, places and data across an open, connected community of health. Connectivity empowers caregivers to make better decisions and deliver better care for healthier populations.
Some Wall Street analysts have cited limited growth prospects for the stock, and it is viewed by others as a turnaround story that has a long way to go. Analysts disagree with management’s strategy of maintaining the company’s core EHR systems provider branding. Instead, they suggest that increasing focus on population health and patient portals could be a better path forward.
The consensus price target is posted at $14.43, and the stock closed Friday at $14.59 per share.
Vantiv
This company has a reasonably solid following on Wall Street, with more Buy ratings than Neutral, but according to the report it is very out of consensus with Wall Street firms. Vantiv is a leading provider of payment processing services and related technology solutions for merchants and financial institutions of all sizes
Vantiv acquisitions have vaulted it to the second slot among the nation’s largest payment processors. The company had been the third-largest processor the prior year, but it cranked out 28% growth in the number of merchant transactions it processed last year, according to a recent Nilson Report. Vantiv processed 15.5 billion purchase transactions last year. It jumped ahead of Bank of America by more than a billion transactions, but Vantiv still trails front-running First Data.
The analysts’ consensus price target is $40.71, and the shares ended last week at $39.06 apiece.
ALSO READ: 5 Stocks That Generate the Highest Free Cash Flow Yield
The distinct advantage of buying solid out-of-consensus stocks is they can still do very well. The ideal scenario is they continue to do well, and then all of a sudden they come back into consensus. Then some real money can be made as the Wall Street bandwagon hops aboard.
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