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Shares of industrial supplier Rexnord Corp. (NYSE: RXN) jumped as much as 13.1% on Monday after being upgraded by a Wall Street analyst. At 11:30 a.m. EDT, shares had fallen slightly to an 8.4% gain on the day.
Barclays analyst Scott Davis upgraded Rexnord's shares from equal weight to overweight and raised his price target from $20 to $26 per share. This was part of a number of upgrades on the thesis that companies serving multiple industries are underappreciated by the market and have significant upside, bolstered by the theory that currencies in emerging markets will start to recover and help sales in coming quarters.
Analyst upgrades and downgrades can often move a stock in the short term, but they have little to no impact on market performance in the long term. In fact, analysts typically underperform the market and are even compensated based more on things like access to management than how well they pick stocks. Keep that in mind when you see a stock like Rexnord pop on an analyst recommendation. Usually, it shouldn't be a reason to change your investment thesis and I think this pop is a great example of that.
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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.