Can an "ugly duckling" like TECO Energy Inc. grow into a swan?
Maybe, according to the Wall Street Journal's influential Heard On the Street column.
Last week, Heard On the Street addressed the investment potential of "ugly ducklings," those stocks listed on the Standard & Poor's 500 index that are most despised by Wall Street analysts and investors.
TECO was one of the companies named. The Tampa utility's stock closed Friday at $11.85, down 18 percent since the start of the year.
"Buying the dregs of Wall Street can be a profitable strategy because getting out in front of the pack, and waiting for other investors to catch up, is the key to successful investing," the column said.
Citing statistics from Zacks Investment Research of Chicago, the column noted that the performance of stocks receiving the worst ratings from Wall Street analysts topped the performance of highly rated stocks in each of the past four years. It's a trend that is continuing this year: according to Zacks, the 1,000 lowest-rated stocks were up 2.1 percent through May, surpassing the 1.3 percent gain posted by the 1,000 stocks with the highest ratings.
No word yet on when Heard On the Street will write about ugly duckling analysts who can't pick stocks. But the column did warn that "buying unloved stocks isn't for the faint of heart," noting, "There are often good reasons why Wall Street is so down on the stocks, and sometimes it pays to listen to the consensus."
