(Written by Rebecca Lipman. Author owns shares of FSLR.)
The Stock Advisors’ George Putnam just released his top ten “bounce candidates,” meaning stocks that may benefit most from end-of-the-year tax sell-offs and portfolio window dressing.
As he puts it, “The extreme volatility this year has produced a particularly interesting crop of year-end bounce candidates.”
Interested in his top picks? Before diving into the list it’s worth noting his requirements: All were worst performers on the S&P 500 in the 2011 calendar year, and only one stock per industry group.
Putnam thinks artificial selling pressures could result in some profitable buying opportunities. Do you agree?
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1. American International Group, Inc. (AIG): The company operates property and casualty insurance networks worldwide and conducts activities in the U.S. life insurance and retirement services industry. Market cap of $44.23B. Unlike other financial institutions bailed out by the US government, AIG has yet to pay back its federal loans. According to Putnam "the stock peaked at $60 in January and has been dropping ever since."
2. Alpha Natural Resources, Inc. (ANR): Engages in the production, processing, and sale of coal in the United States. Market cap of $4.70B. According to Putnam, "The pressure on the stock was increased by an earnings warning and by concerns about the integration of a large acquisition. After 2011's year-long decline, the stock looks undervalued with attractive cash-flow characteristics."
3. Bank of America Corporation (BAC): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap of $55.30B. This stock has been plagued with negative headlines since it bought Countrywide and Merrill Lynch in 2008. So why does Putnam add it to the list? "The sentiment has been so negative that even a big investment from Warren Buffett hasn't helped the stock. But sentiment can change rapidly and even a slight lifting of the gloom could cause the stock to pop."
4. Computer Sciences Corporation (CSC): Provides information technology (IT) and professional services to governments and commercial enterprises. Market cap of $3.91B. Despite an ongoing SEC investigation, Putnam says "the company's strength in providing solutions to complex technology problems positions it well for the future."
5. First Solar, Inc. (FSLR): Manufactures and sells solar modules using a thin-film semiconductor technology. Market cap of $3.83B. After dropping over 65% year to date due to company issues and negative investor sentiment towards the solar industry, Putnam has hope of a revival. "With decent results and a largely debt-free balance sheet, FSLR could rebound sharply when the group comes back into favor."
6. Janus Capital Group, Inc. (JNS): A publicly owned asset management holding company. Market cap of $1.19B. "Its specialty is growth stock funds, which are particularly vulnerable to market volatility. When equity markets firm up, the stock should perform well."
7. Monster Worldwide, Inc. (MWW): Provides online employment solutions worldwide. Market cap of $1.04B. The company fell out of favor in 2011 after "disappointing revenues and bookings." But Putnam has hope: "Its brand is strong and management appears attuned to tweaking the operating model to leverage developing technologies."
8. Netflix, Inc. (NFLX): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap of $4.17B. The stock hasn't had a spectacular year - share price fell from its July peak of $305 to its current price of $75. "Management realized the error of its ways and while the moves it had made tarnished the brand a bit, the company still has a strong business franchise."
9. MEMC Electronic Materials Inc. (WFR): Engages in the development, manufacture, and sale of silicon wafers for the semiconductor industry worldwide. Market cap of $947.23M. After taking on more debt in recent years and approaching a 9-year now, "it looks as though most of the fickle shareholders have already abandoned ship, so any upturn could be sharp."
10. United States Steel Corp. (X): Produces and sells steel mill products in North America and Central Europe. Market cap of $3.76B. The recession dropped demand for steel products, and fearful investors dropped their shares. Putnam is hopeful things will reverse, "if those fears recede, the stock should rebound smartly."