By Rupert Hargreaves

At the end of last week, Credit Suisse published a research report on its 18 contrarian stock ideas. What’s special about this report is that it highlights the companies where Credit Suisse’s analysts hold a view that goes against the consensus.  What’s more, the companies have been selected as the bank’s analysis reveals opportunities that the market has not yet priced in.

In order to arrive at the list of 18 contrarian stock ideas, analysts screened the bank’s whole US coverage universe to identify companies where Credit Suisse’s analysts’ views diverged from that of the rest of Wall Street, focusing on both rating as well as earnings projections. To  Whittle down the pack further, analysts only put forward picks and selected stories in which their conviction level was high.

The result is a list of 12 Outperform-rated contrarian stock ideas and 6 Underperform-rated contrarian stock ideas. Here are five of the top picks. The summary is intended to be a starting point for further analysis by investors themselves.

Contrarian stock ideas

First up is LaSalle Hotel (LHO). Credit Suisse like LaSalle as the stock is currently trading 40% below the bank’s $39 price target. This target is based on a 50% weighting of its $42/share forward NAV, a 30% weighting of a $38/share EV/EBITDA valuation, and a 20% weighting of a $37/share DCF estimate. LaSalle has become a victim of the indiscriminate lodging selloff, giving investors a rare opportunity to buy blue chip lodging REITs at a significant discount to intrinsic value. LaSalle has significant exposure to west coast markets (37.3% of total exposure) where RevPAR growth is most robust. 15% of LaSalle’s portfolio is located in DC, a market that is expected to stage a recovery during 2016 and 2017.

Contrarian Stock Ideas: LaSalle’s discount to the wider sector

Next up is Weatherford International (WFT). Weatherford shocked investors last month when it attempted, and failed, to raise $1 billion in equity with the goal of making a once-in-a-lifetime strategic acquisition. The stock was punished, losing approximately $1.3 billion in market cap in one day. However, aside from this bad judgment call by management, the underlying business continues to show progress. The new management team continues to implement and push metrics on support ratios. Additionally, the financial statements are finally cleaned up: asset impairments and reductions in manufacturing and facility locations have been made. Weatherford expects to generate $150 million to $200 million in free cash flow for 2015 — a rare occurrence for the company. Weatherford has not generated a positive full-year free cash flow for ten years. Credit Suisse has a $13 price target on the stock based on an 11.5x (historical peak) multiple on 2016 EBITDA and a historical 25th percentile P/CF multiple of 8.7x.

Contrarian Stock Ideas: Weatherford’s FCF generation

Boyd Gaming (BYD) is the third contrarian stock idea in this article. Credit Suisse has a $20 price target on the stock based on 9/9.5x 2016 EBITDA. Over a five-year period, Boyd has traded at an average EV/EBITDA multiple of 10.7x with a range of 6.3x-15.8x. Analysts believe that after years of playing defense, several of the company’s capital initiatives in Las Vegas and a recently announced hotel tower at Delta Downs make strategic sense.

Contrarian Stock Ideas: Boyd’s FCF yield

The next of the contrarian stock ideas is L-3 Communications. Credit Suisse’s thesis for L-3 is pretty simple. LLL is the cheapest stock among the Defense primes on an FCF yield basis. Analysts believe that (1) divesting some of the lagging service-driven businesses, and (2) margin upside from the integration of legacy acquisitions should drive a catch-up trade to peers. The bank has a price target of $145 on the stock based on a 7.5% target FCF yield applied to 2016 FCF/share estimates.

Contrarian Stock Ideas: LLL’s FCF

And the final contrarian idea is CF Industries (CF). Credit Suisse likes CF because (1) the company should remain a low-cost producer in the bottom quartile of the global industry, (2) China’s marginal cost of production should be relatively stable vs. market expectation of a decline, (3) North America will continue to import approximately ~25% of nitrogen tons through 2018, and (4) best in class transportation and logistics capabilities should enable CF to report higher than expected regional netbacks. The bank has a $70 price target on the stock based on a 50/50 blended approach between an EV/EBITDA multiple and FCF yield. Specifically, 7x 2016 estimated EBITDA of $2.5 billion, discounted back and a 8% FCF yield on ‘normalized’ FCF in 2017 of $6.7/share, discounted back.