Analyse @ JP Morgan

Jan. 4, 2012, 9:29 a.m. EST

J.P. Morgan: Avoid these 11 stocks

By Meena Krishnamsetty

J.P. Morgan analysts Thomas Lee, Daniel M. McElligot and Katherine C. Khor published a report entitled "US Equity Strategy FLASH" on December 9, 2011. They have listed a number of stocks to avoid that have high exposure to the European markets. All these stocks generate more than 27% of their sales from the European markets. Also, all of these stocks have been given either a neutral rating or an underweight rating by J.P. Morgan.

Considering the macro uncertainties prevailing in Europe, we thought it would be a good idea to alert our readers to be careful when investing in these names. Here are 11 of the stocks with large European exposure:

Edwards Lifesciences Corp. EW -1.61% is a global player in products and technologies which are designed to treat advanced cardiovascular diseases. It has been given an underweight rating by J.P. Morgan. More than 61% of the company's revenue comes from markets outside the U.S., out of which 32% of the revenue comes from Europe. Also, shares of the company are currently trading at $71.4 and are expected to decline to $70 by the end of next year. Hedge funds are selling out their EW positions as well. There were 20 hedge funds with bullish bets at the end of the second quarter. This number went down to 14 by the end of the third quarter. Jim Simons'Renaissance Technologies and Steve Cohen's SAC Capital sold out their holdings during the third quarter.

Illinois Tool Works Inc. ITW +0.52% manufactures a diversified range of industrial products and equipment. J.P. Morgan has given the company a neutral rating. The company generates 48% of total revenue from its U.S. based sources. On the other hand, Europe, emerging markets, and other markets generate 31%, 11%, and 9% of total revenue, respectively. Shares of the company are currently trading at $46.9 and are expected to go north of $51 by the end of next year. Sandy Nairn 's Edinburgh Partners initiated a brand new $232 million position in ITW during the third quarter.

Garmin Ltd. GRMN +0.29% provides navigation, communication, and information devices which are enabled by the global positioning system technology. J.P. Morgan has given Garmin an underweight rating. The company has high exposure to the European market as it generates 31% of total revenue from Europe. Its U.S. based businesses generate 61% of total revenue while emerging markets account for 8% of total revenue. Shares of Garmin are currently trading at $40.4 and are expected to decline to $30.5 by the end of next year. Four of the top five hedge funds in GRMN cut their bets.Robert Joseph Caruso 's Select Equity Group had $158 million in GRMN and reduced its holdings by 4% during the third quarter.

Coca-Cola Enterprises Inc. CCE +0.04% markets, produces, and distributes non-alcoholic beverages. J.P. Morgan has given Coca-Cola a neutral rating. The company generates all of its revenue outside the U.S., with Europe accounting for more than 30% of total revenue. Shares of the company are currently trading at $25.9 and are expected to go north of $31 by the end of next year, indicating an upside of 20% in share prices. During the third quarter the number of hedge funds in CCE went down to 22 from 27 at the end of the second quarter. Scout Capital Group is bullish on CCE though, tripling its position during the third quarter.

Waters Corp. WAT -1.96% is an analytical instrument manufacturer. It has been given a neutral rating by J.P. Morgan. The company generates 70% of total revenue from outside the U.S., with 30% of revenue coming from Europe, 21% coming from the emerging markets, and 18% of it coming from other markets. Shares of the company are currently trading around $74 and are expected to go north $83 by the end of next year. Hedge fund positions in WAT went down to 12 from 17 at the end of the second quarter. Cantillon Capital had the largest stake in WAT among the 350 hedge funds we are tracking.

Weight Watchers International Inc. WTW -0.75%provides weight management services. It has been given a neutral rating by J.P. Morgan. The company generates 66% of its total revenue from the U.S. and 29% of its revenue comes from Europe. The remaining 5% is generated from emerging markets. Shares of the Weight Watchers are currently trading around $56 and are expected to go north of $71 by the end of next year. All of the top three hedge fund holders of WTW reduced their holdings during the third quarter. Alydar Capital sold out its stake in WTW, Renaissance Technologies cut its stake by 71%, and Samlyn Capital trimmed its position by 32%.

Exxon Mobil Corp. XOM -0.02% is a manufacturer and marketer of commodity petrochemicals. J.P. Morgan has given it an underweight rating. The company generated 64% of total revenue from its U.S. based markets. The remaining 36% is split between Europe at 29%, and other markets generating 7% of total revenue. Shares of Exxon Mobil are currently trading around $85 and are expected to reach $88 by the end of next year. Hedge funds are actually bullish about XOM. Ken Fisher has the largest stake in XOM among the funds we are tracking. Fisher Asset Management had more than $500 million invested in XOM at the end of September.

Computer Sciences Corp. CSC -0.12% is engaged in information technology and professional services industry. It has been given an underweight rating by J.P. Morgan. Out of total revenue generated, 63% comes from the U.S., 27% from Europe and 10% from other markets. Shares of Computer Sciences Corp. are currently trading around $23.6 and are expected to reach $27 by the end of next year. Hedge funds have mixed feelings about CSC. On the one hand Glenview Capital and Osterweis Capital sold out their large positions. On the other handSaba Capital , Bridgewater Associates, and Citadel Investment Group boosted their bets significantly.

Willis Group Holdings PLC WSH -0.03% provides a range of insurance brokerage, re-insurance, and risk management consulting services. J.P. Morgan has given the company a neutral rating. More than 55% of total revenue is generated outside the U.S., with 27% of that coming from Europe and the remaining 28% coming from other markets. Its U.S. based businesses generate 45% of total revenue. Shares of the company are currently trading at $38.8 and are expected to decline to $38 by the end of next year. Hedge funds are neutral. Mason Hawkins and Jeffrey Ubben had the two largest positions in the stock and they didn't make significant changes to their holdings.

eBay Inc. EBAY +0.46% brings together buyers and sellers through the internet. J.P. Morgan has given the company a neutral rating. eBay generates 46% of total revenue from the U.S. More than 27% of the total revenue comes from the European markets. Shares of eBay are currently trading around $30 and are expected to go north of $38 by the end of next year. Hedge funds are getting bullish about EBAY. Eric Mindich doubled his stake to $273 million during the third quarter.

Ford Motor Co. F +0.44% produces cars and trucks. J.P. Morgan has given the company a neutral rating. Ford generates 27% of its total revenue from the European markets, 3% from emerging markets, and 14% from other markets. It has a strong U.S. based business, generating the remaining 56% of total revenue. Shares of the company are currently trading at $10.6. Hedge funds dumped their F positions during the third quarter. James Dinan and Leon Cooperman are among the high profile hedge fund managers who aren't bullish about Ford anymore.