Noteworthy Upgrades for the Week That Could Indicate Further Gains

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

For large cap technology and financial companies, upgrades occur in the blink of an eye, and have little effect during day-to-day trading. However, for smaller companies with less coverage, sometimes an upgrade can send the stock higher. Or in some cases it can completely flip the trend if the stock had been falling lower. With that being said I am looking at four noteworthy upgrades that might have merit and long-lasting effect.

Company

Ticker

Firm

Call

Date

TiVo

(NASDAQ: TIVO)

Janney’s

Buy

December 6

Southern Copper

(NYSE: SCCO)

Citigroup

Buy

December 6

VeriSign

(NASDAQ: VRSN)

Wells Fargo

Buy

December 3

Dell

(NASDAQ: DELL)

Goldman Sachs

Buy

December 3

  • During the final two days of last week, TiVo traded higher by more than 4% after a positive note from Janney’s Tony Wilbe. Wilbe suggests that the DVR maker could be acquired by technology giant Google. The basis for the belief is that Google would benefit more by acquiring the company versus Motorola having to pay an enormous settlement regarding damages for set-tops shipped over a six-year period. According to Wilbe, Motorola would have to pay more than $700 million in damages if TiVo receives $0.50 per unit. TiVo is currently trading with a market cap of $1.50 billion so an acquisition would be costly, but Google would gain the company’s growth. Following the news, TiVo is now trading near 52-week highs and might go higher on speculation.
  • Southern Copper rallied 5% last week as Freeport-McMoran fell following its acquisition and move to oil. Citigroup raised its outlook for Southern Copper saying the company is its preferred American copper exposure. The company has cheap growth potential, operates Tier 1 copper assets, and has good long-term upside. Much like TiVo, the stock is near its 52-week high and could continue to rally as copper investors switch to Southern Copper as their play in the copper space.
  • After a horrendous quarter, shares of VeriSign traded higher by more than 6% last week as Wells Fargo remained bullish about the company’s potential and focus to monetize its patents. Furthermore, Barrons added that the company’s .dom deal leaves it with a high margin business following news that the company is looking to re-evaluate its capital structure. Despite the company’s impending problems, it is still a high margin business with decent growth. It is hard to determine if the stock has found a bottom, but with such bullishness from analysts it is very possible that investors will begin to see the long-term upside.
  • Dell has lost 33% of its value throughout the last year, but last week the stock saw an 8.5% return following a two-notch upgrade by Goldman Sachs. The firm stated that the weak outlook for PCs is “baked in” to the price, and that its strong balance sheet should provide support. The company is valued at just 7 times earnings and a price/sales of 0.31. The argument made by Goldman was enough to spark a rally, but there may be some substance. Just look at what we’ve seen from other beat down stock such as Nokia, Research in Motion, and Netflix as of late. For some reason the market seems to like the beat down value plays, and apparently, Goldman believes Dell might be the next to rise.

The key point to remember when assessing upgrades/downgrades is that they are just one firm’s opinion. An upgrade does not constitute as a guaranteed provider of long-term gains, nor does it mean the analyst is correct. However, the arguments made by each of the analysts in this article are on point and could become a reality. Therefore, take some time and perform additional due diligence. If one or several of these stocks fit into your portfolio then “buy.” But do not rely solely on the opinion of others. 


BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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