Stocks that have cratered after a managerial misstep, a bad quarter, or simply a moody market can represent tremendous long-term value for patient investors. Having said that, some beaten-down stocks are better left for dead.
George Budwell: Among healthcare stocks, Opko Health has to be considered one of the top turnaround stories heading into the New Year. Although Opko's stock has fallen by more than 45% from its 52-week highs, the company has slowly been working its way toward building out a well-diversified revenue base that can provide industry-leading levels of growth for years to come. Most importantly, it looks like 2016 could finally be the year the company's plan really takes flight.
The main catalysts to be on the lookout for is the forthcoming regulatory decision for the company's experimental treatment, Rayaldee, for secondary hyperparathyroidism in patients with chronic kidney disease, along with the continued commercial progress of Opko's prostate cancer screening test 4Kscore.
According to S&P Capital IQ, analysts think these two products could drive the company's annual revenue upwards by a noteworthy 141% next year. If so, Opko would transform into a positive cash flow operation capable of supporting its emerging clinical pipeline without the need for heavy rounds of dilution via secondary offerings.
The downside is that a fair amount of Opko's projected sales growth appears to be already built into the stock's price at the point. Specifically, Opko is presently trading at around 4.5 times its projected 2016 sales. While that's not too terribly expensive for a pharma stock, there's no guarantee Opko will meet these lofty sales projections. So, I think Opko is definitely a good turnaround stock to have on your radar right now, but investors shouldn't pick up shares unless they are willing to hold for the long term.
Tim Green: Men's Wearhouse has been nothing short of a train-wreck this year. The stock is down nearly 70% year to date, and down nearly 80% from its 52-week high, driven by the company's ongoing struggle to integrate Jos. A. Bank, which Men's Wearhouse acquired in 2014.
Comparable-store sales at Jos. A. Bank locations have been weak all year, but the company's decision to do away with the popular buy-one-get-three-free promotions has led traffic to fall off a cliff. During the first week of December, comparable sales tumbled by more than 35% at Jos. A. Bank stores.
It goes without saying that 2016 will be a rebuilding year, and Men's Wearhouse will need to completely revamp the Jos. A. Bank brand. The rest of the company, which is mostly comprised of the namesake Men's Wearhouse stores, has been performing well, but the deep problems at Jos. A. Bank are hurting profits. In November, Men's Wearhouse slashed its earnings guidance for the full year.
If Men's Wearhouse can successfully turn around the Jos. A. Bank brand, the stock will look like a steal in retrospect. Currently, the stock trades at around eight times the low end of the company's adjusted earnings guidance for this year. There's no telling how long it will take for Men's Wearhouse to fix the problems at Jos. A. Bank, but this is certainly a turnaround story to watch in 2016.