5 S&P 500 Losers of 2015 Set to Rebound
Stocks faced a difficult time last year with several headwinds impacting the markets. Prominent among the factors influencing the broader markets were uncertainty over a Fed rate hike, weaknesses in China’s economy, a stronger dollar and falling oil prices.
Several market watchers expect 2016 to be no different. Markets are likely to be buoyed by domestic economic strength and buffeted by external headwinds. Despite this situation, specific stocks from the index which declined over 2015 may rebound this year on the strength of their fundamentals. Moreover, they offer good value at relatively attractive prices, which is why it makes sense to pick them up now.
Last Year’s Performance
The S&P 500, generally considered as a reliable indicator of the broader markets, declined 0.7% over the year. More than 250 stocks from the index ended the year in the red. This was symptomatic of the year for stocks as a whole, with the markets ending flat overall.
An economic slowdown in China took a toll on investor sentiment. Plunging oil prices decimated energy companies and adversely affected junk bonds. Uncertainty about the timing of the first rate hike in a decade led to concerns that the Fed lacked confidence in U.S. economic growth.
The U.S. economy hardly helped the markets in 2015. For the first three months, it expanded at a miserly pace, affected by a harsh winter. The economy picked up pace in the second quarter only to slow down in the third.
Outlook for 2016
This year is likely to be marked by a certain degree of domestic strength on the economic front. But companies will be affected by external factors, which have strengthened the dollar and caused a slack in demand. Major slumps are unlikely, but short periods of excessive volatility are expected to recur.
However, the market has responded in a positive manner to the Fed’s rate hike. This indicates that the impact of such a move had already been priced in. Additionally, there is a certain degree of belief in the economy given the significant improvement on the employment front.
Our Choices
Since a number of stocks from the S&P 500 are languishing in the red, it would make good sense to buy those which sport strong fundamentals. A value-centric strategy makes particularly good sense, since excellent choices are now available at relatively attractive prices.
Once the market discovers their true value, investors are likely to profit from these picks. Our selection is also backed by a good Zacks Value Score and Zacks Rank.
We narrowed down our choices with the help of our new style score system.
Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer the best investment opportunities in the value investing space.
United Rentals, Inc.’s URI third-quarter 2015 earnings beat the Zacks Consensus Estimate and also increased year over year. Rental revenue experienced a year-over-year increase, particularly in the Trench Safety and Power & HVAC segments.
United Rentals holds a Zacks Rank #1 (Strong Buy) and has a Value Style Score of ‘A.’ The stock’s price declined 30% in 2015.
Wal-Mart Stores Inc. WMT has delivered positive comps in the U.S. in the last five quarters, after delivering negative comps for many quarters. This was the result of lower fuel prices, which eased consumers’ spending power.
Wal-Mart holds a Zacks Rank #2 (Buy) and has a Value Style Score of ‘A.’ The stock’s price declined 28.6% in 2015.
Qorvo, Inc. QRVO reported healthy second-quarter fiscal 2016 results as adjusted earnings comfortably beat the Zacks Consensus Estimate on a nearly two-fold jump in revenues
Qorvo holds a Zacks Rank #2 and has a Value Style Score of ‘B.’ The stock’s price declined 27.7% in 2015.
Fluor Corporation’s FLR third-quarter 2015 earnings beat the Zacks Consensus Estimate on the back of operational streamlining and the company’s focus on offering integrated solutions.
Fluor holds a Zacks Rank #2 and has a Value Style Score of ‘A.’ The stock’s price declined 22.2% in 2015.
American Airlines Group Inc. AAL reported higher-than-expected earnings in the third quarter of 2015. Total operating expenses declined 11.9% to $8.7 billion on the back of a 43.5% reduction in fuel costs.
American Airlines Group holds a Zacks Rank #2 and has a Value Style Score of ‘A.’ The stock’s price declined 21.4% in 2015.
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