5 Stocks That Should Bounce Back in 2013

The market's been volatile this year, but the end result has been encouraging. The S&P 500 is trading 12% higher in 2012, making this a better-than-average year -- statistically speaking.

However, there have been plenty of stocks that have just gotten hammered this year. Many of them -- perhaps most of them -- won't bounce back. They tanked for good reasons, and the problems aren't easily reversible.

What about the stocks that will bounce back?

Now, some of the five names that I'll be throwing your way are going to be controversial. Their year-to-date returns have been woefully negative, and as an investor you're going to have an unfavorable bias when it comes to this basket of lovable losers.

I'll spell out the turnaround thesis for every stock, and naturally I'll be fully accountable by the end of next year when it's time to look back at this list.

Let's dive right in.

Groupon (NASDAQ: GRPN  ) : Off 81% in 2012.
When a stock rallies on the chatter that its CEO will be let go, and then tanks when he is retained, you know you're unloved.

The daily-deals leader is a mess, and it knows it. Its original model is in shambles, as non-direct revenue is falling. However, the reinvention of Groupon is being ignored by Wall Street. Groupon has taken its 250,000-deep list of merchants and started offering everything from enterprise software solutions to cheap credit card processing. Its business selling physical goods at closeout prices is booming. Groupon isn't the same company that it was when it went public at $20 late last year, but it's worth more than the market thinks today.

Zynga (NASDAQ: ZNGA  ) : Off 75% in 2012.
Bookings are slipping at the company behind FarmVille 2 and Words With Friends, but let me see if I have the right tiles to spell out "turnaround" over a pair of double-word-score spaces.

Zynga shares are moving higher today after the company filed an application to initiate the process of acquiring a Nevada gaming license. It's been successful with Zynga Poker for virtual money, and now it wants to make a play in real-money gambling.

Cash-rich since last year's IPO, Zynga's trading close to its net cash value. If Zynga is able to return to profitability next year as analysts expect, it's hard to see the company falling too much lower.

Active Network (NYSE: ACTV  ) : Off 66% in 2012.
When it comes to online registrations for triathlons, marathons, and other endurance events, Active.com is the undisputed winner. The stock has been a loser, hammered on weak growth and a lack of profitability.

Bank of America Merrill Lynch analyst Nat Schindler upgraded his rating on the stock last week, reiterating a $9 price target that is nearly a double from where the backward-running sprinter finds itself now. Sure, it was his firm that took Active public at $15 last year, but the valuation argument is sound. Active is still expected to grow at a double-digit clip this year, though profitability on an annual basis won't come until 2014 at the earliest. As a buyout play trading for less than next year's revenue or a potential spike as more folks embrace 5k and longer runs for fitness, Active Network is better than its stock chart suggests.

Hewlett-Packard (NYSE: HPQ  ) : Off 46% in 2012.
You don't need to remind me that the PC is dying. HP's flagship businesses of computers and printers just aren't as popular as they used to be. There was also last month's humiliating Autonomy accounting charge.

However, HP has been preparing for this day by gobbling up enterprise-centric companies in recent years. Even in this lull, is HP really worth just four times this year's earnings? That's too cheap for a company that's been thinking outside of the box for longer than you probably think.

Baidu (NASDAQ: BIDU  ) : Off 24% in 2012.
China's leading search engine hasn't been battered as badly as the other names on this list, but it also remains intact as a great growth stock.

A surprising start for a recent entrant in search has spooked investors, but Baidu's still growing at a healthy clip. Analysts see revenue and earnings growth decelerating to 36% and 27%, respectively, next year, but Baidu's stock is also trading for less than 15 times forward earnings.

The bargain won't last.

Then again, none of these bargains will last much longer.

What a deal
Groupon's story is one of the American Dream. The company went from 400 subscribers in 2008 to over 150 million today. While this story is definitely one of triumph on a business level, its success most certainly hasn't been shared by investors. Company shares have fallen over 80% over the past year and left investors panicked. Will this company live out its American Dream, or leave shareholders empty-handed? In order to answer that question, our analyst has compiled a premium research report with in-depth analysis on whether you should buy or sell Groupon right now, and why. Simply click here now to get started.


Read/Post Comments (17) | Recommend This Article (64)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2012, at 5:46 PM, slickandjake wrote:

    HPQ certainly looks attractive at it's P/E ratio and balance sheet. But I don't like it long term at this moment. The conference call after the last earnings seemed to focus almost entirely on R&D of new printers and selling those new printers as well as savings from restructuring which will only begin to have an impact on the bottom line in the second half of the FY. The new printers may provide some revenue, but it is just trying to keep market share of a shrinking business. One person questioned their re-iteration of 3.50 earnings for the year considering they expect 0.70 in the first quarter and that they didn't expect restructuring to help until 3rd qtr. Their answer was that restructuring and cost-cutting was going to have that big of an impact the second half. Seems like a lot of eggs in that basket and it says nothing of trying to GROW. And the R&D is being spent where, printers???? HPQ won't disappear in the next year, but I can't see how the company will do anything but continue to lose sales and revenues the next fiscal year unless there is a change of course or an ace up Meg Whitman's sleeve that she is not divulging.

  • Report this Comment On December 06, 2012, at 9:24 PM, jrice wrote:

    major typo in the Active Network blurb above. It reads Bank of America for some reason.

  • Report this Comment On December 06, 2012, at 9:29 PM, wjcoffman wrote:

    Re: BofA in the Active write-up - someone just got happy with the BOLD feature. It's there because of the reference to the Bank of America Merrill Lynch analyst Nat Schindler.

  • Report this Comment On December 06, 2012, at 9:51 PM, Artis301 wrote:

    I think MF is off its rocker. They talk up crummy stocks and then tell you you shouldn't own them after they tank. Give me a break!

  • Report this Comment On December 06, 2012, at 11:33 PM, depsee wrote:

    I don't see myself jumping on any of these. HPQ is the most established but the first comment above done a pretty good job summing that up.

    GRPN- In the time of only one year the company went public then decided it had a unworkable business model. Now they are reinventing themselves. This may or may not be successful. The areas they are going into based on the article are all established with competition in place

    ACTV- On-Line registration for endurance events. Sounds like a limited market. Unprofitable until 2014 at the earliest. As a survivor of the late 90's building up to the tech wreck, I saw hundreds of unprofitable internet based companies come and go. This has that smell.

    ZNGA- Their gaming business flopped, now trying to get into gambling. They applied for a license, may or may not get it. Also I would assume there are established players already. This along with ACTV and GRPN is a internet based company that has been public around a year. Its business model has failed and is struggling to survive. Like already stated hundreds of these operations came and went in the build-up to the tech wreck.

    BIDU- May be a legitimate operation. I think the problem there is investors find it hard to trust China. I would rather put money on a solid company paying a strong dividend than bet on a Chinese internet company that might be good. That being said, as far as the recent IPO's, their main reason's for going into business failed. I think I would prefer to go for a new IPO with a new idea and hope it works than to go with a recent IPO with a failed idea and hope they can come up with a new one.

    While being a former investor in HPQ and a buyer of their computers I just don't have a vision of where they can go. All areas of the market they are in is saturated with players. They may invent a revolutionary printer and have a good year but the competition would catch up fast. But at least in the one good year you could sell at a profit and walk away. All you have to do is put money in and hope it happens.

  • Report this Comment On December 07, 2012, at 8:28 AM, richtea100 wrote:

    Big on optimism here...

    The author says "and naturally I'll be fully accountable by the end of next year when it's time to look back at this list". What form does this accountability take?

    Also, I'm be curious to know how much the author is going to invest in these stocks? What proportion of his portfolio / net worth is he putting in? Does he believe in them enough to bet himself? Does he hold shares in them already?

  • Report this Comment On December 07, 2012, at 10:44 AM, snapperreef wrote:

    I think deepsee said most all of what needs to be said. The U.S. companies are in trouble. Why invest in them when there are good ones out there?

    Baidu is the only one I know nothing about and it's just because I can't trust the stocks of a country whose politicians can change the game on a whim.

    Hmmm, kind of like another politician changed the game for bondholders in GM?

  • Report this Comment On December 08, 2012, at 3:00 AM, atking wrote:

    This is a horror show of stocks. You have to look away for decency sake.

  • Report this Comment On December 10, 2012, at 11:39 AM, tedwarrenlives wrote:

    error regarding BAC "Merrill Lynch analyst Nat Schindler upgraded his rating on the stock last week, reiterating a $9 price target that is nearly a double from where the backward-running sprinter finds itself now."

    it is at the $10 range already.

    HPQ that is a bold one for a pick.

    Baidu, I don't trust the Chinese they play the "game" all too well like the Wall St. brethren, the "game" to Wall St. has become" stealing our money".

    I wish the Motley Fool would address corruption on all the various levels from CEO,BOD,psuedo-journalis sites, bloggers to the SEC lack of power and other various arms of manipulation.

  • Report this Comment On December 10, 2012, at 12:22 PM, Cogslaw wrote:

    None would be on my rebound stocks for 2013. My list would look more like this.

    STEC, INFA, GS, POT, SCHS

    All companies that dominate their markets with best in breed products and services.

  • Report this Comment On December 10, 2012, at 12:44 PM, DCUDFlyer wrote:

    What a heaping pile of garbage with these stocks, not sure I have the stomach to consider ANY mentioned above.

    And by "bounce back" do you mean beat SPY or as in <80% drop?

  • Report this Comment On December 10, 2012, at 12:54 PM, tazmania99 wrote:

    Guess what? Three stocks on this article are on my 12-stock portfolio, but I am shorting GRPN and HPQ while I am long on BIDU.

  • Report this Comment On December 10, 2012, at 2:06 PM, Mega wrote:

    "When it comes to online registrations for triathlons, marathons, and other endurance events, Active.com is the undisputed winner."

    There's a reason they're the undisputed winner. Nobody disputes it because it's not profitable.

  • Report this Comment On December 12, 2012, at 7:31 AM, mikecart1 wrote:

    Rick, you are off with this article. Groupon is history. They can do all the reinventing they want. As a brand, company, business model, and revenue creator, they are in the history books. Poorly run company that should have never went public.

    Hewlett Packard is just as bad as Dell and I would not mess with either unless I am buying a discounted laptop from one of them.

  • Report this Comment On December 13, 2012, at 11:32 AM, lesliekate wrote:

    The author obviously has never used the Active.com website. It is horrible and has the worst customer support. I consciously avoid events that are tied into Active.com and the space is ripe for someone with good technology to "steal" from Active. I wouldn't touch the stock or the website for that matter.

  • Report this Comment On December 14, 2012, at 9:30 PM, WineHouse wrote:

    The PC is dying??? Methinks this obituary is premature! Perhaps it is being replaced by less-serious lightweight (literally) alternatives for those who don't really use PCs for serious purposes. But there are far too many tasks that tablets cannot handle, or if they handle them, it ain't the same, and as for smart phones -- duh, they're handy-dandies, great for what they can do, and in the future can probably do even more, but even in the future they will be no more a replacement for a PC than they are for a Nikon.

    And as for the Cloud, fantastic as it is, it is dependent on a number of things, not the least of which is an internet connection of some sort. I truly worry about total reliance on the Cloud (especially for the software access). I also worry about the Coast Guard and Navy's total reliance on GPS, to the point where Cadets are no longer required to learn how to navigate with sextant and stars. Scary situation. Would you know how to cook your food if the electricity went out in your home for more than a week? (hint -- most modern household gas stoves have electronic ignitions, so having a gas stove won't help you).

  • Report this Comment On December 21, 2012, at 5:35 PM, Mega wrote:

    "Groupon isn't the same company that it was when it went public at $20 late last year"

    Right, it's worse.

    Losses mean the value of the company is declining. It's pretty stunning how many people don't understand this basic concept.

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