“Upgrade Monday” got off to a strong start this morning as a series of analyst upgrades drive the market higher to start the light holiday trading week. We have warned overly bearish investors about this phenomenon for several months now. Analysts still remain far behind the 8 ball in terms of their estimates and that means the upgrade cycle is not over yet. We should continue to see this trend into Q4 earnings when they’re reported in January.
Notable upgrades included Alcoa and Intel. Both names were upgraded at Barclays. Barclays sees Alcoa rising almost 50% to $22 while they see Intel jumping to $24. Morgan Stanley piled on the Alcoa bandwagon with a new “overweight” rating.
Goldman Sachs wasn’t to be left out of the upgrade charades as they added shares of Potash to their conviction buy list. They also upgraded shares of Mosaic to a buy as they see the potash industry picking up momentum into 2010:
Our view of a fundamental demand recovery in potash in 2010 remains unchanged, and we believe a near-worst-case scenario on 2010 potash pricing is now discounted in stocks. We see a very compelling risk/reward setup and encourage investors to buy shares of both POT and MOS before the market regains its confidence in the fertilizer outlook in 2010 and beyond.
Q4 earnings will be the first major catalyst of 2010. I fully expect this major market moving trend to be a near-term catalyst for equities.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.