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2019 Was a Tough Year but These 5 Stocks May Rebound in 2020

Nilanjan Choudhury

It is turning out to be an epic year for U.S. stocks. The equity market’s relentless rally has catapulted key indexes to new heights, which are headed for their best year since 2013.

The S&P 500 stock index – the broadest measure of the equity market – has added as much as 28.6% to its value so far this year (as of Dec 20, 2019). Other major market indexes also are on course to deliver solid gains. The tech-heavy Nasdaq composite and the 30-company Dow Jones industrial average have increased a respective 34.5% and 22% year to date. In fact, the S&P 500, Dow and Nasdaq notched record closing highs on Friday.

What’s Driving the Rises?  

The S&P 500, for its part, witnessed broad-based gains, with all 11 sectors rising, led by technology, which is up nearly 47%.

Let’s see what went right for the markets in 2019. It’s fairly simple: investors have driven up equities on evidence of economic growth. Another big catalyst was the preliminary U.S.-China trade deal.

Investors cheered the Federal Reserve’s decision to cut rates thrice this year – in July, September and October – coupled with the central bank’s assertions of a robust labor market and strong economic activity. Soaring job growth and a 50-year low unemployment rate have added to the optimism. Moreover, factory production is rebounding, domestic homebuilding market is taking off, while the increase in consumer spending suggests solid momentum for the overall economy. Finally, a sharp fall in the U.S. trade deficit should contribute to the fourth quarter GDP.

The recent agreement on a phase one trade deal between the two biggest economies further boosted the market sentiment. The development – coming after almost two-years of wrangling – is seen to prop up the demand outlook and revive global economic growth. 

What Will 2020 Hold for the Markets?

While 2019 was an exceptional year, going ahead, the odds of an extended run in stocks next year also appear to be good.

The bull market turned 10 this year in March and Wall Street pundits expect the rally to continue in 2020, on the back of an accommodative monetary policy adopted by the Federal Reserve as well as strong fundamentals of the U.S. economy.

Meanwhile, the OPEC+ group announced cutting output by as much as 500,000 barrels per day from Jan 1 for three months to end a supply glut and prop up prices. This is in addition to the existing production curbs of 1.2 million barrels per day by OPEC, Russia and other non-member oil producers. The cartel’s renewed supply cuts lifted energy and commodity companies and helped give the markets another lift.

Certain Underperformers to Bounce Back Next Year

While the markets this year reached new highs, several stocks underperformed. There are chances that some of these stocks might rebound in 2020 given the favorable factors and their fundamental strength.

However, it’s not easy to pick these hidden gems among such underachieved stocks. Hence, we have taken the help of Zacks Stock Screener to make this task relatively simpler.

We have shortlisted stocks that underperformed the S&P 500 so far this year with a market capitalization of at least $1 billion and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

To further cut short the list, stocks with VGM Score of A or B and upward earnings estimate revisions of more than 5% for the next year are taken into consideration. Also, these stocks are expected to top the S&P 500’s forward 12-month earnings growth.

Following five stocks meet these criteria:

The chart below shows price performance of our five picks year to date.

 

 

FUJIFILM Holdings Corporation FUJIY is a leading global producer of photographic imaging products, healthcare and document solutions. So far this year, shares of the company have rallied 24.7%.

The Tokyo-based FUJIFILM carries a Zacks Rank of 1 and a VGM Score of A. The Zacks Consensus Estimate for the company’s FY 2021 earnings has been revised 8.5% upward over the past 30 days. Further, FUJIFILM is expected to record forward 12-month earnings growth of 38.6%.

H&R Block, Inc. HRB is a leading provider of assisted income tax return preparation, do-it-yourself (DIY) tax solutions and other products and services associated with income tax return preparation in the United States, Canada and Australia. The company’s shares have lost 6.8% year to date.

Sporting a Zacks Rank #1, the stock has a VGM Score of B. Meanwhile, H&R Block’s forward 12-month earnings are projected to increase at the rate of 16%. The Zacks Consensus Estimate for the company’s FY 2021 EPS has moved up 25.3% over the past 30 days.

B2Gold Corp. BTG is a gold producer with three operational mines (one each in Mali, Namibia, Philippines). So far this year, shares of the company have rallied 21.3%.

The Vancouver-based B2Gold carries a Zacks Rank of 2 and a VGM Score of A. The Zacks Consensus Estimate for the company’s 2020 earnings has been revised 13.6% upward over the past 30 days. Further, B2Gold is expected to record forward 12-month earnings growth of 123%.

Bristol-Myers Squibb Company BMY is a global specialty biopharmaceutical company focused on the development of treatments targeting serious diseases, with a particular focus on oncology. So far this year, shares of the company have rallied 22.2%.

With a Zacks Rank of 2 and VGM Score of A, the Zacks Consensus Estimate for Bristol-Myers Squibb’s 2020 earnings has been revised 8% upward over the past 30 days. Further, the company is expected to record forward 12-month earnings growth of 32.3%.

PBF Logistics LP PBFX is a leading refiner and supplier of unbranded refined products in the U.S., together with associated logistics assets. The partnership’s units have gained 3.4% year to date.

The #2 Ranked stock has a VGM Score of B. Meanwhile, the downstream operator’s forward 12-month earnings are projected to increase at the rate of 18.7%. The Zacks Consensus Estimate for PBF Logistics’ 2020 EPS has moved up 8% over the past 30 days.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

Start Your Access to the New Zacks Top 10 Stocks >>

Click to get this free report PBF Logistics LP (PBFX) : Free Stock Analysis Report Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report B2Gold Corp (BTG) : Free Stock Analysis Report Fujifilm Holdings Corp. (FUJIY) : Free Stock Analysis Report H&R Block, Inc. (HRB) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research