4 Non-Energy Stocks That Could Be Cut in Half by Year End

Investing

Published: November 3, 2015 10:10 am

Last Updated: January 13, 2020 5:37 pm

It’s easy to throw a dart at a board of energy stocks and have a good chance of hitting a company that has collapsed over 50% this year. But 2015 has not been friendly to other companies as well. Here are four S&P 500 stocks that have nothing to do with oil prices that could be cut in half by the end of 2015.

Alcoa

Alcoa Inc. (NYSE: AA) hasn’t gone much of anywhere since the 2008 financial crisis, and neither has its revenues. Alcoa is as boring a stock as you can own without having the defensive advantages of an AT&T or a sizable dividend for income. Shares are down 49% since 2015 highs, and could easily hit 50% by the end of the year.

Alcoa is essentially a leveraged play on base metal prices, especially aluminum, which has plunged 18% year to date. Constant money printing puts a solid floor under Alcoa by supporting aluminum prices, and the stock seems to have moved in something of a lazy disorganized sine wave since 2008. Multi-decade lows are not far from where we are now, so this one is especially appropriate for those who like to try to pick long-term bottoms. Call it a beginner’s exercise in bottom picking.

Wal-Mart

In one of 2015’s biggest downside surprises, Wal-Mart Stores Inc. (NYSE: WMT) shares have had their worst year ever. The stock is down 37% from its 52-week highs in what seems to be a combination of disillusionment and good old panic. More than any other company, Wal-Mart is the canary in the coal mine for creeping consumer price inflation. As the largest brick-and-mortar retailer and employer, it is the most sensitive to the slightest movement on the inflation front. Slow creeping inflation is why revenues have grown slowly year by year since shares took off in 2012, but earnings have stagnated and even slightly shrunk as the cost of doing business has risen faster.

The 2015 Wal-Mart collapse offers a more constructive warning about upcoming inflation pressures for 2016 than it does about Wal-Mart itself. Shares conceivably could be cut in half by year end if its next earnings statement comes in disastrous, but the decline is likely over for the most part.

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Micron Technology

Micron Technology Inc. (NASDAQ: MU) has already been more than cut in half this year from its highs of $36.60. This semiconductor company has had a really bad 2015. The situation with Micron can best be described as a bad hangover from 2013 and 2014. The past two years were great for Micron shareholders as the company jumped over a revenue sweet spot where earnings began to pull away. It seemed to have gone over a cusp and reached a new level of efficiency. Investors got excited.

But in the end the bottom line fell back to where it was before because revenues stopped growing. If you go over a cusp without pulling away decisively, you can fall back over it. That’s what happened to Micron, and the hangover set in this year.

Seagate Technology

Seagate Technology PLC (NASDAQ: STX) is down 44% in 2015. The decline here is a similar to Micron in that from 2011 to 2014 it was an exciting growth company. But when a growth company stalls and becomes a steady company, its price-to-earnings ratio typically falls in line with new realities. This was the year that Seagate stopped growing and become more of a flavorless staple. Shares have fallen a bit too far though as the dividend yield has shot up to 6.5%. It could prove a nice income investment to park some capital at these levels.

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