"Trade the Ratings" Signals for June 4, 2012 - Apple (NASDAQ:AAPL)

There were three notable analyst rating changes we paid attention to before markets opened on Monday. They produced a move from open prices that averaged above 8% in the first couple hours of trading. Smart Balance

SMBL

was upgraded from Hold to Buy at Canaccord Genuity, who raised the price target on shares from $6.50 to $8. Canaccord analysts took action following an announcement that the company would acquire Udi's Healthy Foods, the leading gluten-free brand in the US, thus solidifying a platform for growth in the arena of health foods. SMBL opened at $6.18 and moved to $6.71 by 11:10 AM, an 8.6% move in less than two hours. The upgrade was reported on Benzinga Pro's real-time rating feed at 5:50 AM. Inphi Corporation

IPHI

was upgraded this morning from Neutral to Overweight at Piper Jaffray, who reiterates a $12 price target on shares. Analysts at Piper Jaffray acted as the company's valuation became attractive two times cash of $4 per share, on top of some encouraging fundamental color reinforcing positive outlook for growth in 2H12. IPHI opened at $8.72 and reached $9.71 by 11:14 AM, a gain of 10.2%. The upgrade was reported at 5:52 AM on Benzinga Pro. Audience

ADNC

was initiated with an Overweight rating and a price target of $23 per share at Deutsche Bank. Analysts at Deutsche Bank acted upon the company's expanding presence among smartphone makers. In particular, Audience's levering to Apple's

AAPL

iPhone supported a positive outlook for shares going forward. ADNC opened at $17.35 and tacked on 7%, trading at $18.57 within 15 minutes before momentum reversed. Deutsche Bank's rating change on IPHI was reported at 6:22 AM on Benzinga Pro.

Since March 2012, we have “traded the ratings” based on three simple rules of thumb:

Go Long on upgrades to Buy or initiations with Buy
Go Short on downgrades with Sell or Initiations with Sell
Pull trigger when the ratings narrative supports a meaningful change in sentiment, AND current price represents significant upside to price targets

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