One of the keys to smart investing is to not overpay for stocks. Sure, it sounds easy, but the reality is many investors end up chasing hot stocks long after the value has left the station.
Often stocks that are laggards in a previous year can all of a sudden perk up and become winners the next year. There are multiple reasons why: The business outlook improves, short-sellers that have preyed on the stock finally give up, changes in the economy and sector dynamics and more.
A new Jefferies research note includes a fascinating chart of big losers from last year that have started out 2016 on fire. Needless to say, some companies from the energy sector show up, but some other solid companies also make the board. We screened the list for stocks that could continue to stay strong and provide investors solid gains.
FLIR Systems
This stock had a rough 2015, down almost 12%, but it is up close to 8% to start this year. FLIR Systems Inc. (NASDAQ: FLIR) is a world leader in the design, manufacture and marketing of sensor systems that enhance perception and awareness. FLIR’s advanced thermal imaging and threat detection systems are used for a wide variety of imaging, thermography and security applications, including airborne and ground-based surveillance, condition monitoring, research and development, manufacturing process control, search and rescue, drug interdiction, navigation, transportation safety, border and maritime patrol, environmental monitoring, and chemical, biological, radiological, nuclear, and explosives (CBRNE) detection.
Goldman Sachs is very positive on this company in the defense sector, noting that the defense business is primarily short-cycle and bookings have started to recover. FLIR’s commercial business has substantial long-term growth potential. It has close to the highest margins and cash return on cash invested in the firm’s defense sector coverage.
The Thomson/First Call consensus price target for the stock is $35.31. The shares closed most recently up over 5% at $30.31.
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Micron Technology
This top technology stock was absolutely mauled last year. Micron Technology Inc. (NASDAQ: MU) trades at a 3.38 price-to-cash-flow figure and was down almost 60% last year, but it is up almost 5% to start 2016. The company is a global leader in advanced semiconductor systems. Its broad portfolio of high-performance memory technologies is the basis for solid state drives, modules, multichip packages and other system solutions. The company’s memory chip solutions enable the world’s most innovative computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications.
Micron and Intel announced last summer the availability of their 3D NAND technology, the world’s highest-density flash memory. Flash is the storage technology used inside the lightest laptops, fastest data centers and nearly every cell phone, tablet and mobile device. The collaboration with Intel on the 3D XPoint also creates new opportunities in SSDs. Micron may have the most room to improve in enterprise grade SSD controllers, which include the electronics that bridge the flash memory components to the SSD input/output interfaces.
The consensus price target is posted at $18.45. Shares closed Tuesday at $14.82.
Kohl’s
This top retailer was hit hard last year, down over 19%, and the stock has started 2016 off solid, up 4%, and still could be offering investors a solid entry point. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States that offer private label, exclusive and national brand apparel, footwear, accessories, beauty and home products. The company also sells its products online at Kohls.com and through mobile devices. As of March 03, 2015, it operated 1,162 department stores in 49 states.
The company was super-aggressive in holiday discounting, which not only pumped up sales, but may have drawn in a slew of new customers who had not previously been customers at the retailer.
Kohl’s shareholders receive a very solid 3.62% dividend. The consensus price target is $52.76, and the stock closed Tuesday at $49.78.
Southwestern Energy
This company also was battered last year, down a whopping 74%, but out of the gate in 2016 shares are up almost 7%. Southwestern Energy Co. (NYSE: SWN) explores, develops and produces natural gas and oil in the United States. The company operates in two segments: Exploration, Development and Production, and Midstream Services.
Southwestern has invested heavily in the Marcellus Shale in Pennsylvania, where it holds leases in approximately 337,300 net acres. Reports indicate that the company has increased its acreage there by acquiring interest from other stakeholders.
The company also is involved in the gathering, marketing and transporting natural gas, as well as oil and natural gas liquids. As of December 31, 2014, Southwestern had pipelines of 2,017 miles in Arkansas, 105 miles in Pennsylvania, 25 miles in Texas and 16 miles in Louisiana in its gathering systems.
The consensus price target is set at $15.34. The stock closed Tuesday at $7.65 per share.
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While there is no guarantee that any of these stocks trade higher, the mere fact that they have come out of the chute roaring this year could be big. In a pricey market, portfolio managers are looking for value, and all these companies have solid businesses and are cheap to their respective peer groups.
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