4 Stocks That Wall Street Hates, 1 It Loves

What follows is a screen of volatile companies with betas greater than 2. They cover a variety of industries, including: computer storage, chemicals, mining, and media. Of the five, the Street is most bullish about CBS (CBS) and most bearish about Hecla (HL). Ratings trends in the former and operational difficulties in the latter are primarily responsible for the respective sentiment. Due to uncertainty in end market demand in technology and fragility in the industrial economy, Seagate (STX), Dow (DOW), and Huntsman (HUN) are all rated "holds".

Seagate Technology

Seagate is rated a "hold" on the Street and trades at a respective 18.7x and 4.3x past and forward earnings with a dividend yield of 3.5%. It has a beta of 2.2.

Consensus estimates for Seagate's EPS forecast that it will grow by 292.7% to $4.87 in 2012 and then decline by 1.6% and 34.4% in the following two years. If the earnings revision is any indication, where the multiples go from here is largely a matter of speculation as it is a matter of macro trends. Of the 23 revisions to estimates, 22 have gone up for a colossal net change of 49.8%.

Dow

Dow is rated a "hold" on the Street and trades at a respective 13.8x and 12x past and forward earnings with a dividend yield of 3%. It has a beta of 2.3.

Consensus estimates for Dow's EPS forecast that it will grow by 33% to $2.62 in 2011 and then by 6.5% and 24.4% more in the following two years. Modeling a CAGR of 20.8% for EPS over the next three years and then discounting backwards by a WACC of 9% yields a fair value figure of $43.54, implying 30.1% upside.

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Huntsman

Huntsman is rated a "hold" on the Street and trades at a respective 16.9x and 6.7x past and forward earnings with a dividend yield of 3.2%. It has a beta of 2.2.

Consensus estimates for Huntsman's EPS forecast that it will grow by 101.2% to $1.67 in 2011 and then by 13.2% and 25.9% in the following two years. Assuming a multiple of 8x and a conservative 2012 EPS of $1.85, the rough intrinsic value of the stock is $14.80, implying 16.6% upside.

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Hecla

Hecla is rated closest to a "sell" on the Street and trades at a respective 13.3x and 12.7x past and forward earnings with a dividend yield of 1.5%. It has a beta of 2.1.

Consensus estimates for Hecla's EPS forecast that it will grow by 48.4% to $0.46 in 2011, decline by 8.7% in 2012, and then grow by 52.4% in 2013. Assuming a multiple of 14.5x and a conservative 2012 EPS of $0.39, the rough intrinsic value of the stock is $5.66, implying 6.4% upside.

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CBS

CBS is rated a "buy" on the Street and trades at a respective 16.4x and 12.8x past and forward earnings with a dividend yield of 1.4%. It has a beta of 2.2.

Consensus estimates for CBS' EPS forecast that it will grow by 70.3% to $1.89 in 2011 and then by 20.6% and 14% more in the following two years. Modeling a CAGR of 32.8% for EPS over the next three years and then discounting backwards by a WACC of 9% yields a fair value figure of $32.18, implying 11.6% upside.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.