It's always helpful to keep an eye on losingstocks . Whether
it's a scan of the stocks making fresh 52-week lows, or a screen
for stocks that have fallen sharply in recentquarters , you may
come across tomorrow's winning trades.
Case in point:Shares of
, which saw its shares slump from $300 in the summer of 2011 to
just $60 a year later. Snapping up this losingstock in the fall of
2012, when most investors were fleeing, turned out to be a wise
move as shares have rebounded a stunning 200% -- in less than five
The 10 Worst Performers of the Past 12 Months*
*representing stocks in the S&P 500 and S&P 400
Here's a look at three deeply-bruised stocks that have serious
rebound potential in 2013.
1. Cliffs Natural Resources (NYSE:
In October 2012, I profiled three stocks that possessed a
solid mix of growth, income and value.
Principal Financial Group (NYSE:
have each risen nearly 20% since then, mining firm Cliffs Natural
Resources has seen its stock fall roughly 8%.
Managementwill discuss quarterly results on Wednesday, Feb. 13,
when you'll hear alot about recent decisions to write off a number
ofbalance sheet assets.Book value stood at $6.3 billion before
those write-downs, but likely still stands above the current $5.2
billionmarket value .
Equally important, management is expected to reiterate its
commitment to the currentdividend . Some investors were expecting
the $2.50 a share payout to be slashed, but as the dividend looks
increasingly safe, investors will likely takenote of the current
juicydividend yield of nearly 7%
2. Deckers Outdoors (Nasdaq:
This maker of footwear and apparel saw its shares plunge 74% from
late 2011 to about $30 a year later. A recent rebound to $42
doesn't begin to reflect the potential for this one-time
Theturnaround is predicated on a second-life for the company's
UGG line of winter boots, which accounts for more than 80% of
company sales. Investors grew concerned that these high-end
products represented a fad that had ended.
You can see those concerns right on the company'sbottom line
:earnings fell nearly 34% from 2011 to about $3.30 a share in 2012
(full-year results will be released on Tuesday, Feb. 19). But it
looks to have been premature to write off the UGG line of boots.
They still likely accounted for roughly $1.2 billion in sales in
2012, and based on recent ordering trends, sales should be modestly
higher in 2013.
In addition, the price of sheep-skin, a key raw material, is
coming back down after a sharp spike a year ago (which partially
explains theprofit drop in 2012). Althoughanalysts predict
company-wide sales will grow a modest 5% in 2013 (to roughly $1.5
billion), they expect the lower sheep-skin costs to help earnings
grow more than 10% to nearly $3.70. Shares trade for just 11 times
To be sure, this stock is unlikely to revisit the $100 mark any
time soon. The days of robust top-line growth have likely passed.
But as the UGG boots hold their own in the United States and
continue to gain traction in (frigid)emerging markets , this
company is likely to produce steady top- and bottom-line growth.
The now-reasonable forwardmultiple has created a solid entry point
for long-term investors.
3. Joy Global (NYSE:
This manufacturer of mining equipment was riding high a year ago on
the heels of a robust outlook forcommodity prices and international
mining trends. Yet during the course of 2012, it became
increasingly apparent that many mining firms planned to throttle
back capital spending in the near-term to boostfree cash flow .
This sentiment has pushed this stock down from $90 a year ago to a
It's crucial to think of Joy Global as a "late-cycle" play as
its order book always rises sharply when the global economic
outlook strengthens (leading to an upsurge in mining activity in
tandem). Still, it's easy to fixate on Joy Global's near-term
challenges: Per-share profits are expected to fall roughly 15% in
2013 to about $6.25. Yet analysts at Goldman Sachs predict that
"tightening commodity supply-demand balances over the course of
2013 will drive visibility on a modest 2014capex recovery." They
expect earnings to rebound to above $7 a share in fiscal (October)
And as we head toward mid-decade, this "late cycle" play should
really start to hits its stride. Goldman sees earnings per share
Joy Global's technical picture may be brightening a bit as well.
Shares appear to have bottomed around $50 in the summer and have
been moving into a higher trading range. Look for more details on
the near-term and long-term outlook from management when 2013
fiscal first-quarter results are released at the end of
Risks to Consider:
All three of these stocks must post a string of solid quarters
before investors will regain trust, so they may take some to
Action to Take -->
AsWarren Buffett oftennotes , you only makemoney in unloved,
out-of-favor stocks. Each of these stocks were in vogue just a year
or two ago, and simply can't be written off as long-term losers.
When each of these companies delivers quarterly results in coming
weeks, investors will have a fresh chance to assess their
prospects, and perhaps jump in before the crowd returns.
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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