The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. NEW YORK ( TheStreet) -- A recent study by Da and Schaumburg published in the Journal of Financial Markets shows that Wall Street analysts can successfully determine mispriced stocks in a given industry. This doesn't mean that their buy and sell recommendations will yield abnormal returns. It means when analysts think a stock is undervalued relative to its peers, it will outperform them. When analysts think a stock is overvalued, it will most likely underperform its peers. Given that analysts' price targets contain useful information, we compiled the list of stocks analysts expect to increase the most over the next 12 months. The data is sourced from Bloomberg and Yahoo Finance. A portfolio that is long the stocks analysts are bullish the most and short the stocks analysts are bearish the most returns more than 25% annually. Da and Schaumburg's analysis showed that investors beat the market by going long the following:
Some of these stocks are also favored by hedge funds. Bank of America had more than $6 Billion in prominent hedge fund investments at the end of December, thanks to John Paulson's and Bruce Berkowitz's enormous investments. Google is the most popular in terms of the number hedge funds with holdings. There were 43 hedge funds with Google positions out of the 175 funds we have been following. Our four favorite picks among these 10 stocks are Micron, Cliffs Natural, F5 Networks, and Monster Worldwide. David Tepper's Appaloosa had a $142 Million position in MU at the end of December. The stock returned around 30% since then.
Cliffs Natural is another hedge fund favorite. There were 15 hedge funds with CLF positions. Ken Fisher and John Burbank had the largest positions in CLF. FFIV was one of the 20 stocks Wall Street analysts expected to dive the most in January. The stock was trading at $140 then. Today it is at $93. Analysts were right after all. Now this is one of their favorites. This article was originally published on Insider Monkey. >>To see these stocks in action, visit the 10 Stocks Analysts Are Bullish About portfolio on Stockpickr.