Will These Seven Stocks Make a Big Comeback?
When companies hit the comeback trail, it isn’t all that different from when a sports team starts a turnaround: It’s about building a new team, writing a new playbook and getting your game on. And as you’d expect, fans in the stands pay plenty to put skin in the game. But whereas the victorious, chest-bumping sports nut gets bragging rights, the successful investor scores bagging rights—the chance to stuff value into that portfolio.
Here we take a look at seven stocks that charged into 2016 hoping to reverse fortunes that went south in previous years. How have they performed? Read on to learn which comeback kids hit the skids, and which ones are turning heads with their turnarounds.
Pfizer Inc. (PFE)
As one of the old guard pharmaceutical giants, Pfizer’s size has been known to stunt both its growth and its ability to pivot. “PFE shares haven't exactly been impressive performers of late either, currently trading near their value from one year ago on the heels of shrinking revenue,” says James Brumley, analyst and feature writer at InvestorPlace.com.
Blame Pfizer’s patent woes: If there’s one thing worse than Viagra wearing off, it’s your Viagra patent wearing off. Pfizer has lost protections on that drug and other cash cows, including Celebrex, Zyvox, Lyrica and Lipitor. But newer products have picked up the slack.
“Breast cancer drug Ibrance is off to a great start after launching in early 2015, logging more than $500 million in sales last quarter,” Brumley says. “Blood thinner Eliquis has made strong showings recently as well.” Meanwhile, Pfizer has 17 drugs in late testing stages.
McDonald’s Corp. (MCD)
Things weren’t looking so good for McDonald’s CEO Don Thompson—a fast food flop who overloaded the chain’s menu to the bafflement of loyal customers. Installed in 2012, Thompson was out less than three years later. Under his watch the stock took a McBeating, falling more than 10 percent. And since? It’s up about a third, trading at $122 a share.
“The new CEO, Steve Easterbook, has completely revamped how the company presents its food to the public,” says Yale Bock, a portfolio manager on Covestor and president of Y H & C Investments in Las Vegas. “He’s changed the supply chain, reduced and simplified the menu, and created more flexibility in meal combinations.” And in a nod to even faster food, he’s stepped up use of apps, loyalty programs and kiosk delivery.
Alibaba Group (BABA)
In September 2014, this Chinese ecommerce company produced the largest IPO in Wall Street history—worth a stunning $25 billion. But if you bought in BABA back then and held it you’re no better off today, as the stock has only risen 3 percent since going public. In fact, you might have the Ali-blahs, given that today’s price stands way off the November 2014 peak of $119 per share, which marked a 75 percent jump from the IPO price.
BABA has surged close to 60 percent since hitting a near-record low of $60.89 per share in February. It now trades just shy of $97, largely the result of beating Wall Street expectations by a mile for its second quarter of 2016. Since Aug. 8, the stock has gained 13 percent.
Yet even if BABA succeeds on all fronts, a much bigger force could cause it massive turbulence, given the dedication of its business to its homeland: the oft-volatile economy of China itself. The “Flash Crash of 2015”—which transpired a year ago—showed there’s no Great Wall of Wall Street that can insulate U.S. markets from China’s financial woes. And since Alibaba bases much of its business on the fortunes of China’s middle class, it has a lot riding on stable conditions in the People’s Republic.
General Electric (GE)
Even with a monstrous market cap of nearly $290 billion, GE faces a formidable challenge: to shed a spread-too-thin identity one might as well dub “General Eclectic.” The evidence is everywhere, from relocation (GE announced plans in January to move its headquarters to Boston) to reallocation (forging a more focused portfolio of companies that build on its industrial strengths).
Up 30 percent from September 2015 but flat for all of 2016, GE currently trades at just above $31 per share. Yet if GE’s pivot towards a streamlined, energy-centric strategy will take some time to complete, it at least looks like a solid work in progress.
GE’s earnings report for the first quarter 2016 beat Wall Street expectations by a hair, as it posted earnings per share of 21 cents, ahead of the 19 cents analysts predicted. Yet some investors were concerned over its revenue miss—and to the bafflement of others, the stock fell after the company's second-quarter results topped expectations again, this time with a revenue jolt of 15 percent. That reflected GE’s best results in five years, but couldn’t keep some shareholders from fixating on the possibility of a lower credit rating due to a stock buyback.
GE shares also fell Aug. 30 after a rejected bid to buy the French wind turbine power group Adwen.
General Motors Co. (GM)
It wasn’t all that long ago that GM took an $11.2 billion government bailout through the Troubled Asset Relief Program—a move that towed the company through its harrowing 2009 bankruptcy. Fast-forward to 2012; those who kicked off the year with faith in GM have thus far been handsomely rewarded. Since New Year’s Day that year, GM stock is up 54 percent, now trading at just below $32 a share. (So far in 2016, it’s in the black by 9 percent.)
Steady domestic sales have helped GM, with second quarter profits up 157 percent compared to Q2 2015. Clearly, the TARP bailout not only saved GM from collapsing, but also helped it return to strength. Much potential lies in China, where GM and its related ventures sold 1.81 million vehicles in the first half of 2016. That’s a record for GM, and marks an increase of 5.3 percent.
Meanwhile, the Chevy Bolt, a 200-mile electric vehicle meant to compete with Tesla (TSLA), is winning the race to bring an affordable electric car to market. Chevrolet’s forward progress with the Bolt has been so strong that Tesla has mounted an apparent counter-move. It introduced its Model 3 with much hype in Los Angeles at the end of March.
Gilead Sciences, Inc. (GILD)
During one short week in April, the stock of this pharmaceutical heavyweight dropped like knocked out boxer: off close to 14 percent after the company missed its earnings and revenue expectations. Right now it trades at $77, off 27 percent from where it was this time in 2014. And that’s a shocker for some, given that between September 2011 and 2014, Gilead’s price skyrocketed by more than 440 percent.
“By far the biggest biopharma company at a crossroads is Gilead Sciences,” says Brad Loncar, CEO of Loncar Investments in Kansas City, Missouri. “Gilead’s revenue has been dominated by two key programs: HIV and hepatitis C. While those will always be significant businesses, growth has moderated so there is a big waiting game right now for them to do a transformational M&A deal in a new area.”
Yet that poses a problem as Gilead tries to live up to expectations straight from its salad days. “From an expectations standpoint, I am concerned the company is set up to be victim of its own success,” Loncar says. “The acquisition of Pharmasset that made them a leader in hepatitis C might go down as the smartest deal in biotech history—so that’s likely an impossible act to follow in terms of how transformative it was.”
Gilead looks to be focused on three major areas at this point for a merger or acquisition: cancer, NASH (liver disease) and inflammatory disorders. “My expectation is that they will probably be most aggressive in the cancer space because I think it gives them the best shot of scoring that transformative deal like they’ve done in the past,” Loncar says.
The hostile takeover battle that placed Tribune Publishing Co. (TPUB) in the crosshairs of Gannett (GCI) took a turn straight out of “The Name Game” in June when the parent of the Chicago Tribune and Los Angeles Times announced it would change its name to “tronc.” Minutes after the name change was announced, countless Twitter users piled on with quips like this: “I believe ‘#Tronc’ is the sound an angry camel makes if you come too close to its calf.”
It’s too soon to tell whether the risky rebranding of the storied Tribune franchise will bear e-fruit. But those down on the tronc moniker, and media stocks in general, might be surprised to learn TRNC stock is up 90 percent this year, trading at $17 per share. What’s more, tronc could hit profitability by 2019, according to analysts following the company.
Yet it’s hard to tell just how much the share price gains came as a result of the Gannett’s offers to tronc shareholders. The McLean, Virginia-based newspaper company certainly enticed many when it offered $12.25 a share in April, a month that saw TPUB sink as low as $6.83. In mid-May Gannett came back again, this time dangling $15 a share—an offer also rejected. It’s uncertain whether Gannett is still in the game, though tronc stock is up 50 percent since the company fought off GCI’s second offer.