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Never Judge a Stock By Its Coverage

Estimates and stock ratings from big-name analysts and institutions can have a major impact on how a stock or a sector performs. Sometimes a stock can be pushed higher, and others can take a dive simply based on the opinions of popular pundits around the industry. But as every investor knows, mistakes are human nature, and it is virtually impossible for an analyst or entity to get every call right. There are many cases in which a sector was not well-liked by the industry but it has its strong performers anyways.

To help illustrate this example, and to drive home why you should never judge a stock purely by its coverage, we present several examples of stocks in relatively disliked or hated sectors (from an analyst stock ratings standpoint), that performed well anyway.

Delta Airlines Takes Flight {% dividend DAL %}

After the spike in crude oil prices just before the Great Recession, analysts were pretty down on the airline industry. That negative sentiment continued for some time, as it seemed that profits for these companies were harder to come by as margins continued to shrink. Apparently Delta Airlines and its stock didn’t get that memo. Here is a look at how DAL has performed over the last five years versus the S&P 500 [see also 7 Charts to Put Corporate Cash in Perspective]:

DAL vs SPY Line Chart

Sherwin Williams {% dividend SHW %} Staves off the Recession

The bursting of the housing bubble took homebuilders for a nasty ride. As the industry collapsed, so did Wall Street’s confidence in the sector. Though SHW is not directly involved in the creation of homes, it is often associated with the index, given that virtually every home needs to be painted. So, it came as a surprise to many when the stock shrugged off the 2008 recession and continued to charge higher over the years, barely stopping to take a breather:

SHW vs SPY Line Chart

Royal Gold {% dividend RGLD %} Begins to Shine

After making highs in 2011, gold and gold miners have had a tough go of things, as the precious metal suffered a sharp correction along with the mining equities that depended on it. Given that, a number of analysts have been down on the gold mining world, as low prices for the metal is typically a sign of weakness. While the stock has not had eye-popping gains as of late, its return in the trailing year and a half is enough to give it a special mention.

RGLD vs SPY line chart

The Bottom Line

Analyst coverage and opinions can be helpful tools when it comes to making investments, but they should only be a part of the equation. There is no such thing as a sure thing in investing and every call has a chance of going wrong. Even when an entire sector is down in the dumps, there are almost always diamonds in the rough. Let your research do most of the talking when it comes time to choose a position while not worrying too much about what every major institution on Wall Street thinks.

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