Buying what nobody else wants

Want to run the opposite way to the crowd and buy a stock that no one else wants? Well according to this article by Avanza there are three Swedish companies that top the most hated list of equity analysts.

PA Resources - an oil company that has been raising capital all year via bonds/shares and whose stock that has been crushed, down 85%.

SAS - an airline company that has made a small profit for the first time since 2008 but is in need of further financing. Interestingly it fell to a low of 5kr in Nov 2013, down 80%, but has since recovered most of that loss and back up another 300%, what a ride!

Axfood -a food retail company whose stock is near its three years high. It's at historically high valuations and I assume this is why it has several sell recommendations.

For me, only the first stock PA resources really passes the 'bombed out' and hated test. However, it's already up 21% this year and in an up trend, sentiment is starting to change from bad to less bad, from hated to less hated.

When sentiment is at its lowest then markets over react on the downside and opportunities arise. Most investors are looking at PA Resources and thinking 'get me out of this!' or 'no chance, I wouldn't buy that!' The sellers get washed out and there is none left to sell and take the stock lower.

This is certainly isn't a 'wonderful company' that you would want to hold forever, however all that is needed is a change of view from 'this is a terrible stcok' to 'this is just a bad stock' for a large pop up in price to occur.

One way I would play this is to treat the share like a call option but with no expiry date and invest no more than I would be prepared to loose completely or at least 50% on the downside.

I will keep track of these three stocks and post an update in the months to come.