Now that 2018 has gotten off to a strong start, many investors are wondering exactly where they should be committing their funds in the months ahead. This raging bull market in the stock market is now nearing nine years old. One trend that has served investors well, at least in the major indexes, is to buy any pullbacks. That has unfortunately not been true when it comes to the stocks that are among the weakest links in the market.
2017 brought gains of 25% in the Dow Jones Industrial Average and more than 19% on the S&P 500. The major stock indexes outperformed every single strategist’s expectations by a wide margin in 2017, and now most strategists are calling for even further gains in 2018 on the heels of tax reform and accelerating growth of earnings and gross domestic product.
For the 24/7 Wall St. base case of the Dow heading towards 26,500, as well as 2,850 on the S&P 500, it will require at least some participation from some unexpected areas. That’s where some of the battered stocks that can be turnaround candidates can come into play.
24/7 Wall St. is featuring several turnaround stocks per day during the first full trading week of 2018. Some of these companies have been severe disappointments for Main Street investors trusting the companies. Some of them may simply be unable to turn around in a fashion that will please the equity investing community. After all, who wants to be forced into taking a 50% (or 75%) loss without any recourse?
Additional trading data and commentary have been offered up on five turnaround candidates for 2018. Consensus estimates have been provided by Thomson Reuters. These are five turnaround stock candidates for 2018, and there are currently a total of 20 that are going to be covered for the week.
Advance Auto Parts: Is Its Death Grossly Exaggerated?
Advance Auto Parts Inc. (NYSE: AAP) was down about 41% in 2017 on fears of Amazon and the multichannel trends hurting the company. With gross profit margins above 40%, the auto parts retailer is still expected to grow sales in 2018 and in 2019. Advance Auto Parts used to have one great chart and great growth trajectory, until the online fears of the Amazon threat.
After a week of trading in 2018, it seems that at least some of the death of retail has been blown out of proportion. If Advance Auto Parts manages to keep growing and showing that it can do even better, then it is very possible that investors will see a better thesis for this and its rivals. At almost 19 times expected earnings, the company is currently valued more or less in line with the S&P 500 already.
Trading at $99.69 at the end of 2017, Advance Auto Parts has a 52-week trading range of $78.81 to $177.50 and a consensus analyst price target of $110.17. Its market cap is $7.3 billion, and it pays a dividend yield of 0.2%. Its shares were last seen trading at $111.39, after a week of trading in 2018.