Jan. 2 (Bloomberg) -- Sears Holdings Corp. is the stock that Wall Street analysts most despise. Of seven analysts who follow what used to be the nation’s largest retailer, not one rates it a “buy.”

According to Bloomberg tabulations as of Dec. 29, the average rating on the Hoffman Estates, Illinois-based company was 1.29 on a scale where 1 equals “sell” and 5 is a strong “buy.” That gave Sears the worst score among the 2,678 U.S. stocks with a market value of at least $250 million.

By contrast, Enterprise Products Partners LP, a natural-gas pipeline operator based in Houston, is the stock Wall Street’s analysts love the most. It garners 16 “buy” recommendations, with nary a “hold” or “sell” in sight. Its ratings score is a perfect 5.

One might think therefore, that Enterprise Products will outperform Sears in 2009. But one might well be wrong.

I did a study of stocks analysts love and loath, covering 1998 through 2007. It turns out that the four stocks analysts favored most as each year began did worse over the ensuing 12 months, on average, than the four stocks they most hated.

Furthermore, both groups underperformed the Standard & Poor’s 500 Index.

Over the 10 years, the average despised stock rose 1.7 percent, compared with a loss of 2.2 percent for the adored ones. By contrast, the S&P 500 rose 7.2 percent a year on average.

Why Analysts Miss

How can this be? It’s paradoxical but not surprising to people who really understand markets. Analysts tend to extrapolate the recent past into the future.

The world, though, is an unpredictable place, and a somewhat cyclical one. Companies that are riding high run into competitors who try to imitate or surpass their products, recruit their executives, and undercut their prices.

Companies that are struggling may improve their fortunes by coming up with new products or services, hiring new managers, and cutting costs. If all else fails, they may be bailed out by a takeover offer.

A note on the study’s methodology is in order. For the first nine years, I used data from Zacks Investment Research to identify the stocks analysts liked or disliked the most. In 2007 I used Bloomberg data but restricted my scope to the 30 stocks in the Dow Jones Industrial Average. This year I’m using Bloomberg data on more than 2,600 stocks.

Now let’s take a look at the stocks that analysts currently revere, and scorn.

Philip Morris

Enterprise Products is the second-largest U.S. natural-gas pipeline partnership by market value. As a master limited partnership, it pays no federal income tax but passes along most of its profits as dividends to shareholders, who do pay tax. Currently, the dividend yield is a lush 10.5 percent.

On the whole, I like Enterprise Products well enough. Yet there is the little detail that natural gas futures prices have fallen to around $6 in December from $14 in July. Also, the company’s debt is 140 percent of stockholders’ equity, an above- average debt load. Analysts’ view may be too rosy.

Second most popular, with a 5 score and 15 recommendations, is Philip Morris International Inc., the world’s largest cigarette maker. I disagree with the analysts on this one. The stock sells for seven times book value, which I consider expensive. The anti-smoking movement is gaining strength in the U.S. and other countries. Litigation and the drain from settled lawsuits keep a lid on profits.

Allegheny Energy

Third in popularity, with a 5 score and 13 recommendations, is Allegheny Energy Inc., an electric utility based in Greensburg, Pennsylvania. I don’t care for this stock either. Its price-earnings ratio of 14 seems expensive to me for a utility, and its dividend yield, at 1.9 percent, is on the skimpy side.

Fourth comes Thermo Fisher Scientific Inc., a Waltham, Massachusetts, maker of scientific instruments and laboratory equipment. Here, I’m solidly with the 12 analysts who rate it a “buy.” Still, the unanimity of opinion makes me nervous.

What about Sears, the most-hated stock? Granted, its stores aren’t adventures in avant garde fashion retailing. But at $36 a share, down from $114 in February, I think the stock has recovery potential. And it’s inexpensive at 0.45 times book value and 0.10 times revenue.

After Sears, the most-despised stock is General Motors, with an average ratings score of 1.5 from 12 analysts. Clearly, there is an imminent risk of bankruptcy here; the company said as much in recent testimony to Congress as it asked for federal aid.

GM stock sells for only $3.20, down from more than $50 a share in 2004. However, the company’s net worth is negative to the tune of about $98 a share. I think the analysts are right to scorn it.

Fannie and Freddie

Analysts also dislike Fannie Mae and Freddie Mac, two huge mortgage companies that get a 1.5 rating from the four analysts that follow them. Here I must agree with the analysts’ pessimism.

As of Sept. 30, stockholders’ equity at Fannie Mae had shrunk to about $9 billion from about $40 billion the previous quarter. The company owed $842 billion in debt. The federal government now owns 79.9 percent of each. I expect current shareholders to be wiped out.

(John Dorfman, chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.)

To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com.

Last Updated: January 2, 2009 00:01 EST