Energy stocks, and to a lesser extent bank stocks, have been the market’s whipping boys in 2019. Now they are being punished anew, as investors sell shares to establish tax losses.
In the fall frenzy of tax-loss selling, certain stocks are often pushed below their intrinsic value, and that is happening now, I believe.
Come the new year, I expect stocks such as Concho Resources, Green Dot and Vanda Pharmaceuticals to benefit from the “January bounce” that often buoys up the previous year’s losers.
Timing is tricky. Sometimes the January bounce starts in December. Some years it doesn’t come at all.
My guess is that there will be a January bounce this year. And I don’t think it will start early, with issues concerning impeachment and the U.S.-China trade war unresolved.
Here are some stocks I might look to buy during the final week of December, aiming to hold them for a year or more.
Concho Resources
Concho Resources (CXO), based in Midland, Texas, explores for and produces oil and gas, mainly in Texas and New Mexico. It is down 28% this year through November 15, and sells for 12 times earnings.
Among the many energy stocks that have been battered this year, I highlight Concho because its balance sheet remains in good shape: Debt is only 24% of stockholders’ equity.
A bevy of famous money managers have bought Concho shares recently, including T. Boone Pickins (known for his oilfield expertise), Jeremy Grantham, George Soros and Steven Cohen.
Green Dot
From Pasadena, California, comes Green Dot (GDOT), which offers pre-paid credit cards. The negative here is that growth has decidedly slowed. The positive is that the company has retired its debt, bringing long-term debt down from $122 million in 2014 to zero now.
Analysts expect earnings to fall in 2020. The stock sells for 12 times recent earnings and 16 times the projected earnings for next year.
Green Dot is down 68% this year, as growth investors abandon the ship. But I think it’s an overreaction.
Vanda Pharmaceuticals
Down 41% this year is Vanda Pharmaceuticals (VNDA), a small biotechnology company (market value $824 million) based in Washington D.C.
Its main drugs already on the market are tasimelteon for the treatment of certain sleep disorders and iloperidone for treatment of schizophrenia. It has a variety of drugs in clinical trials.
Six analysts cover Vanda; five rate it a “buy.” That guarantees nothing, but suggests there’s reason for hope.
Join the Wall Street Insiders
There’s an opportunity open for you, now you can join the wall street insiders and profit like they do, watch the presentation and get started now.
