by Carly Forster and Sarah Roden
2014 was an eventful year on Wall Street with many ups and downs. Although many analysts recommendations made in 2014 were profitable, many recommendations were also incorrect, costing investors a lot of money. Out of 47,000 ratings issued, here’s our list of the best and worst analyst recommendations made in 2014, measured over a 3-month horizon:
The Best Recommendations:
On June 2, 2014, Yaron Werber of Citigroup maintained a Buy rating on Puma Biotechnology (NYSE:PBYI) with a price target of $123. Werber made the Buy rating after Puma Biotechnology revealed that one of their breast cancer drugs had severe side effects. However, Werber remained optimistic and believed that the drug would become “a part of standard care.”
On June 2nd, PBYI shares closed at $57.06, with shares jumping to $266.25 three months later. This increase helped Werber earn a 344.9% return on the recommendation.
In 2014, Yaron Werber made 31 successful ratings out of 42 total ratings, earning a 74% overall success rate and a 25.3% average return per recommendation.
2) On June 9, 2014, Jason Kolbert of Maxim Group reiterated a Buy rating on Achillion Pharmaceuticals (NASDAQ:ACHN)) with a $6 price target. Seeing Achillion as an acquisition candidate in the HCV space, Kolbert noted, “As they trade today (intra-day at $278M market capitalization with over $100M in cash), we see Achillion as a compelling valuation.”
Shares of ACHN were $4.25 when Kolbert made the recommendation and rose to $12.38 three months later, helping Kolbert to earn 191.2% profit on this recommendation.
In 2014, Jason Kolbert made 86 successful ratings out of 196 total, earning a 44% overall success rate with a +4.5% average return per recommendation.
3) On August 18, 2014, analyst Brian Abrahams of Wells Fargo initiated coverage on Immune Design (NASDAQ:IMDZ) with an Outperform rating and a price target of $17-$18. The analyst called IMDZ an attractive company.
Shares of IMDZ were $12.13 each when Abrahams made the recommendation and three months later shares were $34.55, earning Abrahams a 184.8% return for the recommendation.
In 2014, Brian Abrahams made 29 successful recommendations out of 40 total, earning a 73% overall success rate. He has a +30.3% average return per recommendation.
4) On October 20, 2014, analyst Jim Birchenough of BMO Capital initiatied coverage on Vitae Pharmaceuticals (NASDAQ:VTAE) with an Outperform rating and a price target of $11. Birchenough was optimistic about the company’s “efficient structure-based drug design platform [and] deep pipeline of highly selective small-molecule drugs across multiple therapeutic categories.” He specifically highlighted “VTP-43742 for autoimmune disease and VTP-34072 for metabolic disease as key value drivers for VTAE over the next 12 months.”
Shares of VTAE closed at $7.61 when Birchenough made the recommendation in October. The three month horizon is still approaching, but shares last closed at $19.19 on January 6th, earning the analyst a 175.5% return.
In 2014, Jim Birchenough made 51 successful recommendations out of 72 total, earning a 71% overall success rate recommending stocks. He has a +50.7% average return per recommendation.
5) On September 22, 2014, analyst Debjit Chattopadhyay of Roth Capital initiated coverage on Bluebird Bio (NASDAQ:BLUE)) with a Buy rating and a $50 price target. The analyst noted, “Bluebird Bio, Inc., is one of the pioneers of gene therapy. With its proprietary Lentiviral vectors, the company has successfully corrected dysfunctional genes and is well-positioned to deliver single treatment-based curative therapies for multiple monogenic diseases, in our view.”
At the time of the recommendation, shares of BLUE closed at $36.49. Three months later, shares shot up to $89.90, helping Chattopadhyay earn a 146.3% profit from the recommendation.
In 2014, Debjit Chattopadhyay made 42 successful recommendations out of 84 total, earning a 50% overall success rate. He has a +6.4% average return per recommendation.
Worst Recommendations:
1) Robert W. Baird analyst Brian Skorney recommended an Underperform rating on Idenix Pharmaceuticals Inc (formerly IDIX) on April 8, 2014, after the company announced that the data from its phase 1/II clinical trial for its IDX21437 nucleotide for the treatment of Hepatitis C was promising.
However, the analyst was skeptical regarding the safety of the drug’s under development, noting “We still believe a long road lies ahead fraught with risks.” He explained his Underperform rating, saying the “assets in development do not support the current valuation and provide little upside opportunity.”
Shares were $5.83 when Skorney made the recommendation and jumped to $24 three months later. Based on a 3-month horizon, Skorney lost a -308.0% return in profit for his Underperform rating on IDIX.
After Skorney's position closed, Idenix Pharmaceuticals was acquired by Merck (NYSE:MRK) and is no longer an independently publicly traded company.
Brian Skorney has successfully made 32 ratings out of 56 total over the past year, earning a 57% success rate recommending stocks and a +2.4% average return per recommendation.
2) Cantor Fitzgerald analyst Irina Rivkind downgraded her rating on Pernix Therapeutics (NASDAQ:PTX) from Hold to Sell on January 6, 2014, after having concerns over a lawsuit in which the company was sued for breach of contract. The analyst anticipated “a negative reaction in the stock or potential dilution to shareholders from an equity financing event.”
When Rivkand made the recommendation, shares were priced at $2.22. Three months later, Pernix Therapeutics was priced at $5.04. Based on a 3-month horizon, Rivkind lost a -120.2% return in profit for her Sell rating on PTX.
Irina Rivkind has successfully made 57 ratings out of 85 total over the past year, earning a 67% success rate recommending stocks with a +18.5% average return per recommendation.
3) On September 10, 2014, Bank of America/ Merrill Lynch analyst Krish Sankar maintained a Buy rating on Sapphire supplier GT Advanced Tech (formerly GTAT), but cut his price target from $22 to $19 after Apple announced they would not be using Sapphire for its iPhone 6.
Sankar did not expect the new iPhone 6 to have Sapphire, however he did believe Apple’s use of Sapphire in their devices is more of a matter of “when” than a matter of “if.”
Shares were $12.78 when Sankar made the recommendation. Before the 3-month position was closed, GT Advanced filed for bankruptcy and trading of the company's stock on the NASDAQ is now currently frozen. Sankar lost a -97.7% return in profit for his Buy rating on GTAT.
Krish Sankar has successfully made 19 ratings out of 40 total over the past year, earning a 48% success rate recommending stocks with a -3.3% average return per recommendation.
4) On August 13,, 2014, Cowen & Co. analyst Jeff Osborne also covered GT Advanced Technologies with an Outperform rating and a $19 price target, citing that “Apple’s new products launch could serve as a near term catalyst.”
The analyst noted, “We see late 2015/early 2016 as being the end of the transitional period for GTAT as Apple revenue accelerates and solar polysilicon / ingot revenue normalizes and revenue recognition on material Hyperion revenue is achieved.” He continued, “ We note this range implies a ~19x multiple on our 2015 estimates, which is lofty, thus we expect the stock performance to be dependent on additional catalysts such as orders on the announced new products as well as on existing solutions.”
When Osborne made the recommendation, shares were priced at $16.59. As stated before, GT Advanced filed for bankruptcy before Osborne's 3-month position was closed and trading of the company's stock on the NASDAQ is now currently frozen. Osborne lost a -97.5% return in profit for his Outperform rating on GTAT.
In the past year, Jeff Osborne has successfully made 18 ratings out of 37 total, earning a 49% success rate recommending stocks and a -5.7% average return per recommendation.
5) Wunderlich analyst Irene Haas reiterated a Buy rating on BPZ Resources (NYSE:BPZ) with a $7.00 price target on September 23, 2014, after the company released an operations report on September 22, 2014.
The analyst pointed out the operations report contained good news and bad news, the good news being “that the CX15-7D development well at Corvina was completed earlier than expected allowing BPZ to spud the CX15-10D well on September 14, 2014 with completion scheduled for November 2014” and the bad news being “that the Corvina CX15-3D and Albacora A-21D are only producing at 36% of prior levels, suboptimal in our view. Related to this, production from 3Q14 will be lower than volume from 2Q14.”
Shares were $1.97 when Haas made the recommendation and dropped to $0.22 three months later. Based on a 3-month horizon, Haas lost a -88.3% return in profit for her Buy rating on BPZ.
Irene Haas has successfully made 23 ratings out of 77 total over the past year, earning a 30% success rate recommending stocks and a -15.9% average return per recommendation.
Disclosure: All recommendations sourced from TipRanks