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2011 Losers Are 2012 Winners
This year has been a seesaw year for investors. While the overall market appears to be headed for a flat performance, much of the volatility for investors has been anything but flat. Some stocks, like Dollar General (NYSE:DG) and Family Dollar (NYSE:FDO) have rewarded investors as these businesses are more for the price conscious consumer. Both Dollar General and Family Dollar have significantly outperformed the broad market up about 30 and 20% year to date, respectively.
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Different Strokes
Even though the S&P 500 return is flat thus far in 2011, it's been a totally different experience for some stocks and industries. Financials have been the market's redheaded-stepchild in 2011. Even though the big banks continue to reduce exposure to risky assets and boost capital levels, Mr. Market has not been convinced. Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) are both down over 40% so far in 2011. Both trade at valuations that imply another financial catastrophe is around the corner. Yet, both firms have significantly reduced exposure to those esoteric assets that hit them hard in 2008. It seems likely that 2012 will be financially favorable as Europe will have to do what it takes to avert a financial disaster. China's news yesterday that it was adding liquidity by reducing reserve requirement is another favorable development. (Get to know a little bit about the institutions whose actions help to guide free markets. For more, see The Rise Of The Modern Investment Bank.)
A Tech Beat Down
Overall, technology has been a solid performer in 2011 due to the fact that many of the main players were trading at cheap valuations and sitting on piles of cash. Yet, others, like Hewlett Packard (NYSE:HPQ) have been beaten down over 30% thanks to some poor management decisions. The company has attacked those issues with the recent appointment of former eBay CEO Meg Whitman. If the stock price performance of eBay under Whitman's tenure is any guide, then Hewlett Packard shareholders are in for some significant gains, possibly starting in 2012. Shares are trading for close to $28, valuing shares at less than 7 times forward earnings, a wide discount to all of its peers. All the market needs is to gain a little more comfort with Hewlett Packard's new management and shares will likely head higher.
The Bottom Line
For many investors, 2011 is a year to forget. While Europe's financial problems are likely going to be a major focus in 2012, the U.S. economy continues its slow, yet positive, path to a recovery. This year's beaten down stocks stand out as potentially huge winners in 2012.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
Different Strokes
Even though the S&P 500 return is flat thus far in 2011, it's been a totally different experience for some stocks and industries. Financials have been the market's redheaded-stepchild in 2011. Even though the big banks continue to reduce exposure to risky assets and boost capital levels, Mr. Market has not been convinced. Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) are both down over 40% so far in 2011. Both trade at valuations that imply another financial catastrophe is around the corner. Yet, both firms have significantly reduced exposure to those esoteric assets that hit them hard in 2008. It seems likely that 2012 will be financially favorable as Europe will have to do what it takes to avert a financial disaster. China's news yesterday that it was adding liquidity by reducing reserve requirement is another favorable development. (Get to know a little bit about the institutions whose actions help to guide free markets. For more, see The Rise Of The Modern Investment Bank.)
Overall, technology has been a solid performer in 2011 due to the fact that many of the main players were trading at cheap valuations and sitting on piles of cash. Yet, others, like Hewlett Packard (NYSE:HPQ) have been beaten down over 30% thanks to some poor management decisions. The company has attacked those issues with the recent appointment of former eBay CEO Meg Whitman. If the stock price performance of eBay under Whitman's tenure is any guide, then Hewlett Packard shareholders are in for some significant gains, possibly starting in 2012. Shares are trading for close to $28, valuing shares at less than 7 times forward earnings, a wide discount to all of its peers. All the market needs is to gain a little more comfort with Hewlett Packard's new management and shares will likely head higher.
The Bottom Line
For many investors, 2011 is a year to forget. While Europe's financial problems are likely going to be a major focus in 2012, the U.S. economy continues its slow, yet positive, path to a recovery. This year's beaten down stocks stand out as potentially huge winners in 2012.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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