These stocks are ready to replace those zeros on the scoreboard with something more substantial.
Summer’s as good a time as any to assess slumping stars in the stock market, as even baseball legends aren’t immune to a dip in their fortunes. In 1971,
Boston Red Sox shortstop Luis Aparicio went 0 for 44 – that’s 44 times at bat without a single hit – but still managed to make the Baseball Hall of Fame.
(That was a lucky 13 years later, for those counting.)
So what’s the story when a well-known or headline company finds its stock falling into a funk? Sometimes it’s a matter of bad publicity, a fumbling CEO – or
when debt outruns earnings. But other times, the herd mentality of investors pummels a company unfairly.
“The public markets are unforgiving,” says Leslie Bocskor, founder and managing partner of Electrum Partners. “If your stock price is down, and I mean down
significantly over a period of time, that’s all you need to know that there’s a problem. It may not even matter if there’s an underlying fundamental problem
that has surfaced.”
Out of those stocks in the doldrums, which ones are due for hall-of-fame comebacks? Here, we present 10 high-profile companies that have the potential to break
their current slumps in all-star fashion.
McDonald’s Corp. (symbol: MCD) Ronald McDonald and his posse have taken quite a beating in the press lately, which culminated in the resignation
of CEO Don Thompson in March. (In fact, when he did exit, share prices rose.) “This will be a controversial choice,” says Charles Sizemore, founder and chief
investment officer at Sizemore Capital Management in Dallas. “Americans are eating healthier these days, and that means fewer Big Macs. But keep in mind,
McDonald’s has been around for a long time, and as Americans’ tastes have changed, so have McDonald’s’ offerings.” And a clever menu tweak could impact
the stock, which has been flat since January 2012, trading at about $97.
BP PLC. (BP) This oil and gas giant has never quite recovered since the 2010 Deepwater Horizon Macondo oil accident, the largest marine oil
spill in U.S. history. What’s more, “With oil and gas prices down significantly over the last year, the company is restructuring some of its assets in the
lower 48 states,” says Yale Bock, founder and president of Y H & C Investments in Las Vegas. On one hand, BP could lose big if a federal judge imposes the
maximum civil fine of $13.7 billion for the disaster; the ruling is pending. But on the other hand, “BP has a great deal of confidence in their current
operating assets … I think there is a lot of value in BP.”
Wal-Mart Stores, Inc. (WMT) They’ve just brought back those Wal-Mart greeters – but bringing back their share price is another story: It’s
off nearly 20 percent this year, currently trading at about $73. “Wal-Mart's stock has really disappointed this year, and the company has struggled to grow
same-store sales,” Sizemore notes. Meanwhile, online retailers such as Amazon.com are making an aggressive play for Wal-Mart’s customer base. Yet the
Bentonville, Arkansas, behemoth “is slowly getting its act together online and is taking a few plays out of Amazon's book,” he says.
Suncor Energy Inc. (SU) Founded in 1853, this energy giant based in Calgary, Alberta, ranks No. 188 on the Forbes 2000 list. But it’s also
one of the many legacy companies in a tailspin with this year’s oil price nose-dive. Now trading at about $27, “It’s like a spring that’s tightly compressed,
ready to release,” says Victor Chiu, business development manager at Centaria Properties in Vancouver, British Columbia. “To me, they’re a true legacy stock:
time-tested with a large [market capitalization],” currently about $45 billion. “They’re a quintessential part of any energy portfolio that people may have
Hewlett-Packard Company. (HPQ) The tech company that began in a garage has been parked on the market sidelines in 2015. It’s down about 25
percent for the year (to about $32) and trading lower than exactly five years ago ($45.92). But HP did triple between late 2012 and late 2014, and it’s
well-liked by Keith Trauner and Larry Pitkowsky, co-portfolio managers at the GoodHaven Fund, based in Millburn, N.J. “In 2012, near the lows, the company
generated more cash than Coca-Cola or Disney, yet the headlines screamed disaster,” Trauner says. There have been no such headlines of late, and thus no news
should be good news. Given the 2013 run-up, “It has been a rewarding investment for us and our clients and shareholders,” Trauner says.
Yahoo! Inc. (YHOO) Dipping 20 percent since November (it’s at about $41), Yahoo still has that nagging image problem of a dot-com property
whose best days are long gone. But perception hardly meets the reality, as Yahoo owns shares in the Chinese e-commerce giant Alibaba that are worth about $40
billion. Yahoo also generates “nearly $1 billion of cash flow a year,” Bock says. “So a spinoff of Alibaba will unlock the value here, hopefully.”
Hertz Global Holdings Inc. (HTZ) Hertz might as well be limping through the airport these days, as the rental car legend is down a third
since August (now at about $21). But here’s one stock scenario where buying meets renting. “A potential spinoff, whether end of 2015 or early 2016, will
unbundle two valuable assets,” says Jonathan P. Morgan, deals analyst at independent equity analyst firm The Edge Consulting Group. That involves the parent,
Hertz’s rental car business, and the possible spinoff, Hertz Equipment Rental Corporation. Morgan also likes new CEO John Tague, who took the reins in November.
Barrick Gold Corp. (ABX) Precious metals investors know Barrick well, as this Toronto-based outfit is the largest gold mining company in the
world. Yet it’s been on a four-year slide toward zinc country, priced at just $11 a share compared to $56 in mid-2011. So why do Trauner and Pitkowsky still
see gold in them thar hills? Despite poor acquisitions and out-of-control spending, “The company continues to own rich and world-class gold mining reserves,”
Pitkowsky says. A new board chairman has also come in – former Goldman Sachs President John Thornton – and he’s really shaking things up. “He’s been moving
quickly to reduce debt, cut headquarters and operating costs, attract talented operating managers, bring in financial partners and regain the original
[company] culture,” Pitkowsky says.
Time Inc. (TIME) This media company has been through more spinoffs than a Tilt-a-Whirl, first as part of the AOL split in 2009 and then from
Time Warner in June 2014. The stock has bounced up and down since, and is off about 6 percent for the year, at roughly $24. “Time continues to endure revenue
pressure in both advertising and circulation,” Morgan says, though rigorous cost-cutting measures have helped balance that out. As the owner of Sports
Illustrated, People and (of course) Time, it could be “a potential takeover target, with Meredith Corp. as the leading candidate.” Adds Morgan: “We expect
Time to witness some degree of stability in its financial performance over the long term.”