So far, 2013 has been a great year for equity investors. With both the Dow Jones Industrial Average and the S&P 500 Index trading up in the double-digits, we wanted to take a look at those companies that were taunted and beaten throughout 2012 and that have posted a significant recovery for the brave investors who pointed their thumbs up at a wave of pessimism.
We would caution that some of the turnaround stocks have not yet truly turned around. Efforts have been made, progress is at least apparent and shares have risen handily from the lows. We credit much of this to the major bull market. Investors have to remember that in good times it is often the market’s ugly ducklings and sloppy pigs that rally more than the best and safest companies.
24/7 Wall St. wants to warn that any (and maybe even all) of the turnarounds of these companies could again flop. Some of the long-term pressure may have been economic, some might be execution. In more than one case for sure, it may just be that the world’s habits and preferences have headed in a different direction.
What these companies have in common is strong performance year-to-date and off of the lows of 2012. They also all have what would be considered as mid-cap or large-cap market valuations, or their sales are high enough that they would be in that range if they were profitable. Another common trait is that the pressure these companies have felt has been a multiyear issue. Lastly, they are all liquid and have large short interest.
Our take is that each of these companies could have even further significant upside in its stock if the turnarounds can continue. That being said, we have doubts on many of these. and we would warn risk-averse investors that big risks face each and every one of these companies either in the near-term or in the long-term.