Deep Dive: These beaten-down stocks are expected to roar back in 2019

Heading into earnings season, there has been quite a bit of positive energy in the U.S. stock market, following a brutal fourth quarter. The SP 500 Index has returned 3.6% this year through Jan. 11, following a 13.5% decline in the fourth quarter.

Here’s how all 11 SP 500

SPX, -0.60%

sectors have performed, sorted by how poorly they fared in the fourth quarter:

Total returns  SP 500 sector 2019 through Jan. 11 Q4 2018 2018 2017 Energy 8.1% -23.8% -18.1% -1.0% Information Technology 2.6% -17.3% -0.3% 38.8% Industrials 5.4% -17.3% -13.3% 21.0% Consumer Discretionary 6.0% -16.4% 0.8% 23.0% Communications Services 6.3% -13.2% -12.5% -1.3% Financials 2.8% -13.1% -13.0% 22.2% Materials 3.4% -12.3% -14.7% 23.8% Health Care 1.6% -8.7% 6.5% 22.1% Consumer Staples 1.6% -5.2% -8.4% 13.5% Real Estate 3.2% -3.8% -2.2% 10.8% Utilities 0.6% 1.4% 4.1% 12.1%   SP 500 Index

SPX, -0.60%

  3.6% -13.5% -4.4% 21.8% Dow Jones Industrial Average

DJIA, -0.53%

  2.9% -11.3% -3.5% 28.1%  

For the broad indexes, 2019 looks good so far when compared to all of 2018. However, there is still a way to go to make up for losses.

In a report on Jan. 14, Goldman Sachs U.S. chief equity strategist David Kostin said his team’s “base case” target for the SP 500 at the end of 2019 is 3,000 points, which would be a 16% increase from the close at 2,596 on Jan. 11.

Goldman’s data indicate that “decelerating growth favors defensives over cyclicals.” Following a year of massive cuts in federal income taxes, it is no surprise that U.S. companies aren’t expected to increase their earnings in 2019 anywhere near as much as they did in 2018. But earnings don’t tell the full story. The consensus among analysts polled by FactSet is for the SP 500 to increase sales by 5.3% this year, following an estimated increase of 9.3% in 2018.

Kostin ranked the SP sectors, favoring information technology, communication services and utilities as “overweight,” with neutral ratings for health care, financials, consumer staples and energy, and “underweight” ratings for the consumer discretionary, industrials, real estate and materials sectors.

Rather than factoring in the type of top-down economic analysis Kostin incorporated into his sector ratings, analysts’ ratings and price targets for individual stocks reflect assessments of value based on earnings and sales estimates, as well as expectations of share buybacks and, in the case of energy companies, oil and natural gas prices.

Favored, but bruised, stocks

There are SP 500 stocks with majority “buy” or equivalent ratings from sell-side analysts that are down at least 20% from the end of the third quarter (with dividends reinvested). Here’s the entire list, sorted by the implied 12-month upside potential, based on consensus price targets:

Company Ticker Total return – 2019 through Jan. 11 Total return – Sept. 28, 2018, through Jan. 11, 2019 Share ‘buy’ ratings Closing price – Jan. 11 Consensus price target Implied 12-month upside potential Nektar Therapeutics

NKTR, -0.24%

25% -33% 69% $41.01 $73.09 78% Noble Energy Inc.

NBL, -1.31%

18% -29% 66% $22.19 $34.14 54% Anadarko Petroleum Corp.

APC, -1.85%

9% -29% 86% $47.65 $71.95 51% Conagra Brands Inc.

CAG, -2.96%

1% -36% 80% $21.61 $32.18 49% Alexion Pharmaceuticals Inc.

ALXN, -1.79%

14% -20% 90% $111.13 $165.05 49% Align Technology Inc.

ALGN, -1.55%

-5% -49% 88% $198.25 $293.53 48% Albemarle Corp.

ALB, -0.48%

0% -22% 76% $77.41 $113.57 47% Nvidia Corp.

NVDA, +0.76%

11% -47% 65% $148.83 $217.47 46% Baker Hughes, a GE Co. Class A

BHGE, -1.62%

7% -31% 80% $23.10 $33.17 44% Cimarex Energy Co.

XEC, +1.23%

15% -24% 69% $70.64 $101.16 43% Allergan PLC

AGN, -0.17%

12% -21% 77% $149.26 $213.72 43% American Airlines Group Inc.

AAL, -1.01%

-1% -23% 76% $31.80 $45.21 42% Tapestry Inc.

TPR, -0.28%

8% -27% 72% $36.35 $51.66 42% Activision Blizzard Inc.

ATVI, +1.91%

0% -44% 77% $46.54 $65.19 40% Devon Energy Corp.

DVN, -1.06%

17% -34% 66% $26.36 $36.73 39% Diamondback Energy Inc.

FANG, -0.02%

12% -23% 94% $104.10 $144.53 39% Halliburton Co.

HAL, -1.92%

16% -24% 83% $30.70 $42.42 38% Schlumberger NV

SLB, -1.63%

16% -31% 64% $41.74 $57.65 38% DXC Technology Co.

DXC, -2.14%

15% -34% 67% $61.08 $84.30 38% NetApp Inc.

NTAP, -1.56%

4% -27% 53% $61.65 $84.95 38% Norwegian Cruise Line Holdings Ltd.

NCLH, -0.91%

9% -20% 80% $46.19 $63.58 38% Abiomed Inc.

ABMD, -2.07%

0% -28% 92% $323.80 $442.60 37% Valero Energy Corp.

VLO, -0.71%

5% -30% 71% $78.47 $107.00 36% TechnipFMC PLC

FTI, -0.31%

15% -27% 76% $22.60 $30.80 36% Concho Resources Inc.

CXO, +0.24%

17% -21% 86% $120.45 $163.22 36% United Rentals Inc.

URI, -1.14%

15% -28% 67% $117.45 $159.07 35% Jacobs Engineering Group Inc.

JEC, -1.06%

3% -21% 89% $60.47 $81.88 35% Micron Technology Inc.

MU, -4.30%

13% -20% 62% $36.01 $48.44 35% Alliance Data Systems Corp.

ADS, -0.99%

12% -29% 59% $167.47 $223.17 33% Electronic Arts Inc.

EA, -1.65%

15% -25% 81% $90.70 $120.15 32% Tiffany Co.

TIF, +0.10%

7% -33% 57% $85.82 $113.36 32% Raytheon Co.

RTN, -0.66%

4% -22% 76% $159.17 $209.11 31% Textron Inc.

TXT, -0.58%

4% -33% 73% $48.01 $63.07 31% FedEx Corp.

FDX, +0.24%

6% -29% 86% $170.99 $224.52 31% Constellation Brands Inc. Class A

STZ, +0.22%

-1% -26% 79% $159.21 $209.00 31% Citigroup Inc.

C, +3.10%

9% -20% 71% $56.69 $74.33 31% Take-Two Interactive Software Inc.

TTWO, -2.95%

6% -21% 83% $109.03 $142.91 31% PVH Corp.

PVH, -1.76%

14% -27% 87% $105.77 $138.14 31% Marathon Oil Corp.

MRO, -1.86%

12% -31% 71% $16.11 $20.83 29% United Technologies Corp.

UTX, +0.28%

3% -21% 64% $109.95 $141.68 29% SVB Financial Group

SIVB, -0.60%

13% -31% 82% $215.27 $277.29 29% EOG Resources Inc.

EOG, +0.22%

11% -24% 74% $96.87 $124.36 28% V.F. Corp.

VFC, +0.07%

0% -23% 68% $71.46 $91.64 28% American International Group Inc.

AIG, +0.70%

6% -21% 62% $41.66 $53.31 28% FLIR Systems Inc.

FLIR, -0.70%

2% -27% 70% $44.60 $56.75 27% Zimmer Biomet Holdings Inc.

ZBH, -1.88%

1% -20% 56% $104.28 $130.41 25% Huntington Ingalls Industries Inc.

HII, -0.50%

2% -24% 57% $194.52 $242.15 24% WellCare Health Plans Inc.

WCG, +0.74%

5% -23% 78% $247.42 $307.56 24% Southwest Airlines Co.

LUV, +0.14%

4% -22% 64% $48.52 $60.30 24% Laboratory Corp. of America Holdings

LH, -0.53%

4% -24% 57% $131.92 $163.39 24% General Dynamics Corp.

GD, -0.61%

4% -20% 52% $163.81 $202.60 24% DaVita Inc.

DVA, -0.52%

9% -22% 62% $56.07 $69.09 23% Ameriprise Financial Inc.

AMP, -0.57%

9% -23% 71% $113.44 $139.27 23% Affiliated Managers Group Inc.

AMG, -0.55%

5% -25% 64% $102.11 $124.33 22% Equifax Inc.

EFX, -0.30%

4% -26% 58% $96.65 $116.56 21% Idexx Laboratories Inc.

IDXX, -1.39%

4% -23% 63% $192.91 $228.80 19% Source: FactSet

You can click the tickers for more about each company, including news, profiles, price ratios, charts and financials.

The favorable ratings and high price targets don’t necessarily mean that any of the listed stocks are right for you. However, they do show that the brokerage industry is “pushing” these stocks. The list might serve as a good starting point for your own research.

Don’t miss: These dividend stocks beat the Dow and SP 500 through thick and thin

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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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