Credit Suisse Highlights 10 Contrarian Stock Plays

Credit Suisse's research team put together 10 contrarian stock ideas: 5 bullish and 5 bearish. These are ideas where Credit Suisse analysts stand apart from the consensus view.

Outperforms:

AK Steel (NYSE: AKS) - "Street underappreciates AKS's exposure to the spot market, and also, we are more optimistic than consensus on steel prices given cut in BOF capacity and limits on imports."

Kellogg (NYSE: K) - "K trades at a discount to peers and has almost zero support from the sell side but we see good visibility to 7-9% EPS growth, which should help re-rate shares."

Nationstar Mortgage Holdngs (NYSE: NSM) - "Investors are skeptical of NSM’s ability to generate profitable returns on its servicing portfolio but we expect the company to deliver better returns, which should help close discount to BV."

U.S. Steel (NYSE: X) - "Street fails to appreciate the immense operational leverage that X has to rising steel sheet prices, which we expect to sustain through the back half of the year."

Whole Foods Market (NASDAQ: WFM) - "Investors should own this controversial name when sentiment is low and as comps bottom because as comp trends start to reverse stock could re-rate (much like KR)."

Underperforms

Alimentation CoucheTard Inc. (ATDB.TO) - "Street forecasts are too high owing to exuberant expectations for M&A and profitability, but we are more cautious following our proprietary analysis."

Aon plc (NYSE: AON) - "We see consensus estimates as overly optimistic on margin improvement and FCF development over the next few years but we see several risks to the FCF story"

Cisco Systems (NASDAQ: CSCO) - "CSCO's switching business remains under pressure but that's obscured by strong performance elsewhere, but eventually it will lead to margin compression."

PulteGroup (NYSE: PHM) - "Consensus expectations are too high as PHM's balanced capital allocation strategy is likely to produce more modest growth than peers."

Valmont Industries (NYSE: VMI) - "We think that consensus over-estimates both the top-line recovery in the Irrigation and Utility parts of the company, as well as the margin leverage on any top-line rebound. We think Irrigation equipment demand will remain subdued given the significant expansion in the installed base over the past decade, and choppy soft commodity prices, which weigh on customer incomes and cash flows and hence their future investments. We also highlight that VMI has been a key beneficiary of falling steel prices in recent years; this tailwind now appears to be reversing, which could yield a considerable headwind to gross margins in 2017.

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