You know it has been a tough year for a stock when the market is up more than 25% but the stock is down. Underperformance in an up market can happen for many reasons. Earnings misses or poor guidance, product recalls, sector out of favor, poor corporate execution, bad headlines and more.
In a new research report, the U.S. Product Management team at Jefferies scoured through the list of bottom quintile performers in their coverage universe. They came up with some pretty intriguing names with Buy ratings. For investors looking for fresh ideas after a breathtaking run, some of these well-known names may be just the answer.
Intuitive Surgical Inc. (NASDAQ: ISRG) may be one of the most intriguing names on the Jefferies list. A top momentum stock for years, its robotic surgical device the da Vinci is the most popular unit in the world. The great promise of the da Vinci, and almost all robots that assist surgeons, is that this very expensive machine will standardize procedures enough to eventually bring down the overall cost of the medical operating cost explosion. Down 25% this year, Intuitive Surgical may be a stock for 2014 and beyond. The Thomson/First Call price target for the stock is $425. Shares closed Thursday at $368.30.
Broadcom Corp. (NASDAQ: BRCM) is another intriguing name for investors to look at. Thursday, the chip analyst at Nomura, Romit Shah, speculated that Intel might look to acquire the company in an attempt to speed up its entry into wireless and communications networking. Investors receive a 1.7% dividend. The consensus price target for the stock, which is down more than 12% this year, is $32. Broadcom closed Thursday at $28.32.
Citrix Systems Inc. (NASDAQ: CTXS) is another top echelon tech name that is down almost 12% this year. Cowen recently named the stock a top stock to buy for 2014. Citrix solutions help IT and service providers build clouds, leveraging virtualization and networking technologies to deliver high-performance, elastic and cost-effective cloud services with market-leading cloud solutions for mobility, desktop virtualization, networking, cloud platforms, collaboration and data sharing. The consensus price target for the stock is $70. Citrix closed Thursday at $57.38.
VeriFone Systems Inc. (NYSE: PAY) is another name that has had a dreadful 2013. Down almost 17%, the stock remains a name to buy at Jefferies. If you go into any taxi, you will see their systems. With a new CEO and management team, this is a company that is trading at 12 times earnings, though it should be more in the 15 to 20 times. The consensus price target for the stock is only $25. VeriFone closed Thursday at $24.32.
Wal-Mart Stores Inc. (NYSE: WMT) is not down this year, but the retailing giant has way underperformed the market. Despite the early worries about a shortened holiday selling season, the conventional wisdom now is that the season will be better than early predictions. Walmart’s low price pitch continues to resonate with American consumers hit hard in the recession. Investors are paid a 2.4% dividend. The consensus price figure is set at $84.50, and Walmart closed Thursday at $78.50.
Aeropostale Inc. (NYSE: ARO) is on the Jefferies list. The stock leads a group of possible LBO candidates with a current internal rate of return of a whopping 29%. The company recently adopted a poison pill plan to thwart unwanted takeover attempts. The retailer denied that it was resorting to these measures to ward off any specific takeover proposal. Its plan, that was effective November 26, aims to provide stockholders with adequate time to fully assess any takeover bid. The retailer indicated it would put the plan to a stockholder vote at its 2014 annual meeting. The plan will expire at the 2014 annual meeting if it does not get stockholder approval. Down almost 35% this year, and the consensus price target for the stock is $10. Aeropostale closed Thursday at $8.24.
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) is the ultimate contrarian play as precious metals have been so out of favor. While up a little more than 8% this year, the stock represents the best way to play a metals and mining rebound. Any upturn in the world and domestic economy can help life the price of copper. Gold at some point will be a nice hedge against inflation exacerbated by the central banks around the world printing money. Plus, investors are paid a nice 3.6% dividend while they wait for a rebound. The consensus price target for the stock is $40. Shares closed Thursday at $34.29.
It is one thing to buy a stock for a dead cat bounce. It is quite another when you have the chance to buy a top name that had a bad year. Some of the names that have underperformed have been sector leaders at one time. There is at least a decent chance any or all the Jefferies names can rebound next year.
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