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Market pessimism vs. analyst optimism: The stock underdogs

What are we looking for?

Beaten-down stocks with brightening outlooks.

Today's offering will appeal to anybody who cheers for underdogs. Over the past few months, as the market rallied, some stocks have been mauled – and not always for good reason. We decided to go looking for shares that are licking their wounds but still have plenty of fight left in them.

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How we did it

Craig McGee, senior consultant at Morningstar Canada, delved into the Morningstar CPMS database to find Canadian stocks that have managed the unusual feat of losing ground in the stock market while gaining ground in the eyes of analysts.

To qualify, a stock's total return had to have gone down over the past 60 days. The stock also had to have positive revisions in terms of analysts' expectation for its share price, earnings and revenues over the coming year.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia.

Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers.

CPMS data cover more than 95 per cent of the investable North American stock market.

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What we found

The 16 companies that qualified are a mixed bag, spanning both old economy firms such as convenience store operator Alimentation Couche-Tard and new technology stories such as Westport Innovations, developer of truck engines that run on natural gas.

The only theme that these companies share is a divergence of opinion about where they're headed. Will the market's pessimism prove more accurate than analysts' optimism? You should do your own research before deciding. But in such differences of opinion, it's common to find some good profit opportunities.

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About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More

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