4 Loser Stocks Poised for a Comeback in 2013
Of course, not all stocks joined in on the upside. In fact, there were 45 stocks scattered over the S&P 500, S&P 400 (mid-caps) and S&P 60 (small-caps) that plunged by more than 40% over the past year.
Many of those falling knives will stay down, which is why you shouldn't try to catch them. But the investing landscape is also filled with stocks that fell deeply out of favor in one year, only to rally sharply in the next year. Netflix (NFLX) , for example, plunged from $300 in the spring of 2011 to below $60 by the summer of 2012 but is now back up above $170. The huge gain over the past six months wasn't anticipated by the crowd that simply saw a losing stock chart.
Diamond Foods (DMND) , the packaged food company behind Kettle Brand chips, Emerald nuts, Pop Secret popcorn and other items, has been on a losing streak that began 16 months ago. Shares moved above $90 back then but now trade below $16.
What went wrong? A botched acquisition of the Pringles brand potato chips, fraudulent dealings with walnut growers, a complete turnover of management, and a last-minute capital infusion that boosted the share count were just some of the factors.
All of those issues are now behind Diamond Foods, but shares have failed to rebound as recent quarterly results remain messy. New management continues to sort out the final details of the mess that they inherited. More than likely, the new management team will look to sell off one of those brands to raise cash.
On a sum-of-the-parts basis, analysts at D.A. Davidson think shares are worth at least $20 a share, which is more than 40% above current levels. This stock will never revisit the heights seen back in 2011, but better days appear to lie ahead.
A half decade ago, retailer J.C. Penney (JCP) was one the most respected department store operators, and its shares moved above $80. By the time the company hired Apple (AAPL) veteran Ron Johnson in June 2011, the company had already lost its mojo, and shares had fallen to just $35. Johnson's first 19 months on the job have not gone as planned; shares still sit below $20.
Johnson aimed to revamp the retailer along the lines of Apple's strategy, creating a differentiated shopping environment characterized by many stores-within-a-store, all of which were aimed at replicating the enjoyable shopping experience at Apple's stores. He also wanted to get rid of all of the regular discounting that saps retailers' profits. That second move has backfired, and Penney has again begun to run merchandise-moving sales.