It was one of my gutsier calls late last year. I took a look at some of the biggest losers of 2012 -- stocks that were down by as little as 24% and as much as 81% year to date -- and predicted that they would bounce back.
I didn't expect to be right on all of them -- there's a reason why these investments had fallen out of favor. However, I felt there were enough catalysts in place to provide at least a modest bounce in 2013. The five market calls turned out better than I could have imagined, soaring between 69% and 195% in 2013.
There are still a handful of trading days left in 2013, but I may as well punch out now, as I plan to be back later this week with five stocks that should bounce back in 2014.
Let's line these picks up.
|Company||Share Price Dec. 31, 2012||Share Price Dec. 9, 2013||Gain|
|The Active Network||$4.91||$14.50*||195%|
|Groupon (GRPN 1.35%)||$4.86||$9.62||98%|
|Hewlett-Packard (HPQ 5.62%)||$14.25||$27.25||91%|
|Baidu (BIDU 4.79%)||$100.29||$171.90||71%|
|Zynga (ZNGA 6.94%)||$2.36||$3.99||69%|
It's a pretty remarkable showing. The average stock gain of 105% easily trounces the S&P 500's 27% return in that time. Even the worst of the performers -- Zynga's 69% pop -- is more than double the gain of the general market.
The Active Network was the big winner, nearly tripling after the leader in endurance event registrations agreed to be acquired at $14.50 a share. The company behind Active.com was in the right place at the right time as the country flocked to marathons and 5K runs as social and lifestyle fitness events. Active Network just struggled with profitability, and that may be easier to overcome now that it's not under pressure to deliver on a quarterly basis.
Groupon has nearly doubled. The daily-deals model was exposed as flimsy last year. Merchants weren't sold on the repeat business they were hoping to achieve by selling introductory deals for a quarter on the dollar, and flash-sale shoppers tired of impulsively snapping up Groupon deals that they wouldn't go on to use. Groupon's model began to evolve for the better late last year. It started to move into physical goods, and it began to milk its growing Rolodex of small merchant connections to offer other business services including credit card processing. The plan is working. Groupon has turned a profit every quarter this year, and analysts see revenue growth accelerating from 8% this year to 14% come 2014.
Hewlett-Packard was another big winner in 2013. It's still far from perfect. Folks aren't buying PCs, and HP isn't much of a factor in smartphones and tablets the way it is in desktops and laptops. However, HP remains the world's largest seller of PCs, and that's still a very lucrative business that the tech bellwether has used to diversify into higher-margin business services. The end result is that analysts see HP's bottom line growing from $3.56 a share last year to $3.67 a share this year. We're not talking blazing speed here, but clearly this wasn't a stock that should have started off the year trading at just four times earnings.
Baidu has gone from zero to hero this year. China's leading search engine began the year with uncertainties as a smaller rival began gaining ground with a rival search platform that it introduced in the summer of 2012. Baidu actually slumped through the first part of 2013, bottoming out in April. It went on to hit all-time highs after making some savvy acquisitions that made it a leading player in streaming video and mobile apps. Baidu's latest quarter was a blowout, with revenue climbing 42% and the revitalized dot-com darling expecting growth for the current quarter to accelerate.
Finally, we have Zynga. It's the relative laggard with its 69% year-to-date pop, and it's also the one whose fundamentals haven't really improved this year. Zynga's leadership in mobile games has suffered as finicky players move on from its once-hot diversions. Bookings are down. Profitability continues to be elusive. However, Zynga began the year worth less than the cash on its balance sheet. That was crazy. Zynga also brought in a seasoned video game vet to come in as CEO, giving investors hope that a new strategy will help the cash-rich company get back on track.
All in all, it turned out to be a pretty solid list of comeback candidates. Given the market's rally in 2013 it will be harder to sift through this year's losers to find stocks that will bounce back, but I'm going to give it a shot later this week.