There's upside to Sears as most-hated stock

Sears Holdings Corp. is the stock that Wall Street analysts most despise. Of seven analysts who follow what used to be the nation's largest retailer, not one rates it a "buy."

According to Bloomberg tabulations as of Dec. 29, the average rating on the Hoffman Estates-based company was 1.29 on a scale where 1 equals "sell" and 5 is a strong "buy." That gave Sears the worst score among the 2,678 U.S. stocks with a market value of at least $250 million.

By contrast, Enterprise Products Partners LP, a natural-gas pipeline operator based in Houston, is the stock Wall Street's analysts love the most. It garners 16 "buy" recommendations, with nary a "hold" or "sell" in sight. Its ratings score is a perfect 5.

One might think therefore, that Enterprise Products will outperform Sears in 2009. But one might well be wrong.

I did a study of stocks analysts love and loath, covering 1998 through 2007. It turns out that the four stocks analysts favored most as each year began did worse over the ensuing 12 months, on average, than the four stocks they most hated.

Furthermore, both groups underperformed the Standard & Poor's 500 Index.

Over the 10 years, the average despised stock rose 1.7 percent, compared with a loss of 2.2 percent for the adored ones. By contrast, the S&P 500 rose 7.2 percent a year on average.