The snow may be falling, but optimism is riding high for Wall Street and investors as we dive headlong into a new year. What began with a whimper in 2016 ended with a bang. In less than two months since the election, the iconic Dow Jones Industrial Average has ticked off more than a dozen all-time highs.
However, not all companies participated in the end-of-year surge or the market's amazing rally from its Feb. 2016 lows. These downtrodden companies provide long-term investors with the opportunity to seize the day and pick out attractively priced high-quality companies that could form the foundation of growth for their portfolio for years to come.
Here are four top stocks trading at discounts that investors should consider buying this winter.
Activision Blizzard, Inc.
We'll begin in the technology sector by taking a closer look at video game developer Activision Blizzard (NASDAQ:ATVI). Shares of Activision are down about 5% year to date, but they've been hit hard over the past quarter as competition in the mobile and online gaming space has heated up.
One of the more attractive aspects of Activision Blizzard is its convenience. Whereas some of its peers are still tied to traditional gaming consoles -- and make no mistake about it, Call of Duty is still a major growth driver for the company -- Activision Blizzard has ramped up its reliance on digital revenue. During the third quarter, 86% of its GAAP revenue came from digital sources compared to just 64% in the previous year. We're talking about a more efficient, less costly method of reaching the consumer that should translate into growing profits and better margins for Activision Blizzard.
There's also a lot to like when it comes to Activision's gaming diversity. Even though King, the maker of mobile game Candy Crush, saw a modest quarter-over-quarter revenue decline, its mobile bookings and average revenue per user grew from the prior-year period. Furthermore, the World of Warcraft franchise drove record participation in value-added services. Sporting a PEG ratio of just below 0.8, Activision Blizzard could be a top stock poised to rebound.
Barrick Gold Corporation
Physical gold started 2016 off with a bang, registering its best quarter in 30 years during Q1 2016. After August, though, it all went wrong. The Federal Reserve has returned to its hawkish stance on monetary policy and the dollar has been strengthening, which is all bad news for gold stocks, including Barrick Gold (NYSE:ABX), which has lost around 30% of its value over the past six months.
However, Barrick Gold is perhaps the most cost efficient of all gold miners. It's reduced its all-in sustaining cost (AISC) estimate multiple times this year, with the midpoint of its forecast now at $760 per ounce, a full $370 per ounce below gold's current spot price. What's more, Barrick believes that as it brings new sources of production online, it can push its AISC below $700 per ounce, which would give the company an exceptionally large margin buffer.
At the same time, Barrick has done a remarkable job of reducing its expenses and debt. After ending 2014 with $13.1 billion in debt, Barrick is on track to finish fiscal 2016 with just $8 billion in debt, which means lower interest expenses and more financial flexibility. It's also reduced its capital expenditures by roughly three-quarters in just four years. By focusing on only its highest ore-grade projects, Barrick has laid a foundation for success, even with gold around $1,100 per ounce.
Jazz Pharmaceuticals PLC
Mid-cap specialty drugmaker Jazz Pharmaceuticals (NASDAQ:JAZZ) is another top stock to have high up on your watchlist this winter. Jazz's stock has shed more than 20% year to date, mainly on account of both presidential candidates and now President-elect Donald Trump post-election criticism of drug-pricing practices in America. Jazz's lead drug, Xyrem for narcolepsy, increased in price by more than 840% between 2007 and 2014, meaning Jazz Pharmaceuticals could be a prime target should drug reform policies find their way to the president's desk.
But there are a lot of what-ifs regarding pricing reform. First, Trump has a laundry list of priorities to handle, and it's unlikely that drug-pricing reform is anywhere near the top of the list. Also, Republicans, who are in firm control of the House and Senate, are more likely to side with a free market than impose restrictions on drug developers. It probably means companies like Jazz Pharmaceuticals will be able to retain most of their pricing power.
The end result is that Xyrem sales should continue to shine for Jazz, and a new advertising campaign can only help. Xyrem's growth rate is probably going to top 10% once again in 2017. When coupled with its exceptionally low corporate income tax rate -- Jazz is based in Ireland -- that allows it to keep more of its profits, this single-digit forward P/E top stock looks to be an incredible value.
Skechers USA Inc.
Another top stock expected to take a step in the right direction this winter is footwear and accessories retailer Skechers USA (NYSE:SKX). Skechers' rough 2016 sent its shares down by nearly 20%. Much of the blame can be credited to earnings weakness caused by a fire in its Malaysian warehouse, adverse currency effects, and a shift in its domestic whole business into a later quarter.
The best news for shareholders is that Skechers' issues in 2016 are probably going to be confined to just a few quarters. While a warehouse fire is unfortunate, it's not a recurring cost. Likewise, though currency can adversely impact Skechers' top and bottom lines, it's not as if we as investors can look past currency moves to get a feel for how the underlying business is performing. During the third quarter, Skechers wound up recording a 10.1% increase in year-over-year sales, which continues its recent trend of double-digit sales growth.
Skechers' aggressive expansion plans outside the U.S. should also intrigue prospective investors. Nearly three-quarters of Skechers' stores are located outside the U.S., which could be a smart strategic move that results in higher growth rates. Of course, it could also lead to high spending and a few quarterly hiccups. Investors who keep their eye on the long term are probably going to be rewarded with a superior growth rate compared to its retail footwear peers.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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