The only way to make a comeback is to first fall on hard times. With that in mind we turn to Dee Gill of YCharts, who reminds us that losers can make great bargains.
"Consider a few Biggest Losers of 2010. By this time last year, shares of Rite Aid (NYSE: RAD), H&R Block (NYSE: HRB) and Dean Foods (NYSE: DF) had all made the Top 10 list of worst performing Fortune 500 companies, with losses ranging from 40% to 52%. But investors who bought the shares in January 2011 aren't complaining."
Indeed, last years' biggest losers have rebounded spectacularly. Year to date Rite Aid, H&R Block and Dean Foods have increased 37.5%, 35.03% and 24.43% respectively.
Could this year's batch of biggest losers make a similar comeback?
Rebound candidates
Gill has helpfully compiled a list of 2011 losers that "appear to have respectable prospects going forward."
First on his list is Alpha Natural Resources (NYSE: ANR). The coal company's shares are down 62% so far this year. Its value was affected "like all the others by low coal prices, higher mining costs and fear that weak economies will mean less consumption."
Its potential for a rebound stems from the company's strong cash flow and the fact that the company still makes money. "And as long as China, India and other developing country customers continue to import lots of coal, the company will continue to have a big customer base."
Second on the list is Johnson Controls (NYSE: JCI), maker of car parts. The company "had a little trouble this year getting its costs under control and correctly estimating proper inventory levels." Year to date the stock has fallen 21.32%.
But things could be looking up for JCI. It reported solid sales growth in each operating unit in the third quarter. It's also working on several projects, including a battery plant in China, to "help sales gains continue even if the U.S. car market falters." The company has also been graced with "buy ratings" from several investment agencies.
The next rebound candidate is Southwest Airlines (NYSE: LUV). "Yes, shares of the airline routinely voted the best-run company in the business were down some 36% by mid-December, clobbered by high fuel costs and stiff competition that cut profits even while revenues grew."
Gill argues that most industry observers think 2012 will be a fruitful year for the airline industry. Especially for Southwest, which is "by far the most expensive in the sector, trading at a price-earnings ratio of about 38."
Southern Copper (NYSE: SCCO), the last rebound candidate from YCharts, fell 34.29% YTD thanks to the falling price of copper. But Southern Copper Corp has something their rivals do not: a very attractive (although potentially unsustainable) 9.45% dividend.
The company has also has "consistent profits, a strong balance sheet and relatively high profit margins."
Here's more information on the names mentioned above. (Click here to access free, interactive tools to analyze these ideas.)
1. Alpha Natural Resources: Engages in the production, processing, and sale of coal in the United States. Market cap of $4.40B. The stock is currently stuck in a downtrend, trading -7.12% below its SMA20, -12.41% below its SMA50, and -47.55% below its SMA200. The stock has lost 63.99% over the last year.
2. Johnson Controls: Engages in building efficiency, automotive experience, and power solutions businesses worldwide. Market cap of $20.33B. The stock has lost 21.18% over the last year.
3. Southwest Airlines: Operates as a passenger airline that provides scheduled air transportation in the United States. Market cap of $6.52B. The stock has lost 35.91% over the last year.
4. Southern Copper Corp.: Engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. Market cap of $25.30B. The stock has lost 33.55% over the last year.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
