While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of GrafTech International Ltd. (NYSE:GTI) sank 6% this morning after Jefferies downgraded the graphite products company from buy to hold.
So what: Along with the downgrade, analyst Luke Folta planted a price target of $13 on the stock, pretty much exactly where it closed yesterday. While momentum traders might be attracted to GrafTech's strong share price in recent months, Folta is concerned that the current valuation overlooks several near-term headwinds.
Now what: According to Jefferies, GrafTech's risk and reward trade-off is pretty balanced at this point. "Following the ~36% rise in valuations since our upgrade and incorporating a weaker pricing trajectory for GE and needle coke in 2014, we lower our rating to Hold (from Buy)," Folta noted. "We continue to see LT upside given industry restructuring and gradual demand improvement though expect 2014 will be another challenging year for mkt. trends." When you couple those challenges with GrafTech's 50-plus forward P/E, it's tough to disagree with Jefferies' cautious stance.
More reliable ways to build wealth
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of GrafTech International Ltd. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.