Investors are always on the lookout for untapped opportunities, especially in stocks that have been heavily discounted and now present promising opportunities for those prepared to wager on a recovery.
As the new year looms, a seasoned strategy, known as the Laggards trade, is witnessing a revival.
In its recent analysis, Goldman Sachs has shone a light on stocks that have trailed the broader market significantly on a year-to-date basis. Despite their underperformance, these Buy-rated securities hold considerable potential for robust gains in the upcoming year.
Laggards can often represent contrarian investment opportunities, as they may not have garnered bullish sentiment from investors yet, or the prevailing analyst consensus might be so low that even minor positive changes in fundamentals could result in significant performance gains.
The Laggard Phenomenon: The year 2023 has been a turbulent one for many stocks, with some sectors witnessing declines reminiscent of the tumultuous years of 2007 and 2020. However, history suggests a silver lining the laggards of one year often emerge as leaders in the first quarter of the next.
Goldman Sachs equity strategists, Deep Mehta and Tarun Lalwani, CFA, explained that despite a 37% YTD underperformance relative to the S&P 500 index, 2023s laggards could be next years leaders, as the market rally in November suggests signs of an early reversal.
Sector Shift: This years laggards differ from those of 2022, with Healthcare, Financials, and Industrials taking the lead. These stocks align with several key investment themes: low financial returns, lower quality scores, affordable valuations, and high growth prospects.Goldman Sachs Unveils 5 Clusters Of Stocks In The Laggards Trade
1) Laggards with Differentiated Bullish Views: These are Buy-rated stocks by Goldman Sachs analysts, who hold a contrarian opinion compared to less than half of Wall Street analysts. They have at least a 10% upside potential. Some of the stocks included in this group are as follows: Moderna Inc. MRNA : Upside to target 189%, YTD underperformance vs. S&P 500 -75% Pfizer Inc. PFE : Upside to target 66%, YTD underperformance vs. S&P 500 -63% Enphase Energy Inc. ENPH : Upside to target 48%, YTD underperformance vs. S&P 500 -79% Loading… Loading…
2) Laggards with Consensus-Defying Estimates: These stocks have Goldman Sachs estimates that significantly diverge from the consensus, suggesting a potential surprise factor. Highlighted below are some key stocks within this group: Darling Ingredients Inc. DAR : Upside to target 86%, YTD underperformance vs. S&P 500 -47% Shoals Technologies Group SHLS : Upside to target 89%, YTD underperformance vs. S&P 500 -60% ANGI Homeservices Inc. ANGI : Upside to target 84%, YTD underperformance vs. S&P 500 -16%
Read also: Will Novembers Turkey Rally Set Stage For Decembers Santa Claus Rally For Stocks?
3) Growth at Reasonable Valuations: These are Buy-rated laggards projected to have double-digit topline growth in 2024 and 2025, with a Price-Earnings-Growth ratio below 1.0. Included in this group are the following notable stocks: Array Technologies Inc. ARRY : Upside to target 89%, YTD underperformance vs. S&P 500 -60% First Solar Inc. FSLR : Upside to target 72%, YTD underperformance vs. S&P 500 -13%
4) Laggards with Rebounding Margins: These stocks are expected to show positive sales growth and improving operating margins in 2024 compared to 2023. The following represents a selection of stocks categorized in this group: Bath & Body Works Inc. BBWI : Upside to target 45%, YTD underperformance vs. S&P 500 -39% Sensata Technologies Holding ST : Upside to target 45%, YTD underperformance vs. S&P 500 -37%
5) Laggards with Superior CROCI: These are stocks with a consistent Cash Return on Capital Invested (CROCI) greater than the Weighted Average Cost of Capital (WACC), indicating efficient capital use and profitability. Key stocks within this group are listed below: Aptiv PLC APTV : Upside to target 52%, YTD underperformance vs. S&P 500 -29% Bristol-Myers Squibb Co. BMY : Upside to target 38%, YTD underperformance vs. S&P 500 -50%
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ANN ARBOR, Mich. — Julian Sayin threw three touchdown passes, including a 35-yarder to Jeremiah Smith on a fourth down in the second quarter, and No. 1 Ohio State beat No. 15 Michigan 27-9 in a dominant performance on Saturday.
The defending national champion Buckeyes (12-0, 9-0 Big Ten, No. 1 CFP) likely earned a first-round bye in the College Football Playoff. They can keep their top seed with a win against No. 2 Indiana (12-0, 9-0, No. 2 CFP) in the conference championship game Saturday night in Indianapolis.
Ryan Day should sleep well, a year after losing The Game when his team was favored by about three touchdowns. The upset extended his losing streak in the series to four games and sparked speculation he might also lose his job.
The Wolverines (9-3, 7-2) started strong with two field goals and an interception on the first three possessions of the game, but couldn’t generate pressure when Ohio State wanted to pass.
After throwing an interception on his second snap, redshirt freshman Sayin took advantage of the time and space he had to throw.
Sayin was 6 of 6 for 68 yards with two touchdowns on third and fourth down in the first half, including a 4-yard throw to Brandon Inniss with 16 seconds left that made it 17-9 at the break. He finished 19 of 26 for 233 yards and threw for at least three touchdowns for the sixth time this season.
Tulane coach Jon Sumrall has emerged as the clear favorite to be the next head coach of the Florida Gators, sources told ESPN’s Pete Thamel.
Florida turned its attention away from Ole Miss coach Lane Kiffin earlier this week after getting the sense through irregular communication that he is interested in other options, likely a move to LSU or remaining with the Rebels, sources told ESPN on Friday.
Sumrall is expected to make a decision on his future by Sunday morning as he considers staying at Tulane or a move to Gainesville. He also received significant interest from Auburn, but the Tigers have since shifted their focus to other candidates, another indicator that Florida looms as the clear leader for Sumrall’s services, sources said.
Sumrall, a former SEC player at Kentucky, where he later served as an assistant coach and co-defensive coordinator, is 18-7 in two seasons at Tulane. He also won back-to-back Sun Belt titles as head coach at Troy in 2022 and 2023.
Sumrall, 43, garnered outside interest after his first season with Tulane, earning a contract extension after just one season at the helm.
Tulane (9-2) hosts Charlotte on Saturday night in its regular-season finale. The Green Wave can clinch a spot in the American Conference championship game against North Texas with a win over the 49ers.
Grief was not lonely today in Hong Kong. Three days after the worst fire in the history of modern Hong Kong, it feels as though it has barely sunk in.
The weekend at least lent them time to pay tribute, and gave them some space to reflect.
People came in droves to lay flowers, so many a queuing system was needed.
Image: People queue with flowers near the site to mourn the victims of the deadly fire. Pic: AP
Official books of condolences were also set up in multiple parts of the city.
It was the first day large teams of investigators were able to enter the site. Dozens of them in hazmat suits were bused in, their work the grimmest of tasks.
Every so often you could see a flashlight peep through the window of an upper blackened window, a reminder that the fire services are still undertaking dangerous work.
But the reach of the authorities is ramping up here.
Image: Firefighters walk through the burned buildings after the deadly fire. Pic: AP
Yesterday a grass roots aid distribution centre was the vibrant heart of the response.
They received notice at 4am that they needed to pack up and move on. By 10.30am, the mountains of donations were gone, residents watched on, bewildered.
The task apparently will be handed over to professional NGOs.
“I think the government’s biggest concern is due to some past incidents,” one organiser tells us. “They may liken this to previous events. The essence looks similar.”
Image: Pic: AP
She’s careful with her words, but she’s clearly hinting at major pro-democracy protests that were crushed by authorities in 2019.
Any sort of mass gathering is now seen as a risk, the system is still very nervous.
And they might well be because people here are angry.
What, they ask, did the government know? What did it choose to ignore?
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How Hong Kong’s government failed to act on fire fears
Indeed, Sky News has learnt that residents raised their fears over fire safety connected to extensive renovations on Wang Fuk Court as early as September 2024.
They flagged the suspected flammability of green nets being used to cover the building.
An email response from the Labour Department was sent a few months later to Jason Poon, a civil engineer-turned-activist, who was working with residents. It insists that “the mesh’s flame retardant properties meet safety standards”.
But many clearly didn’t believe it. Posts spanning many months on a residents’ Facebook group continued to voice their fears.
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Hong Kong fire survivors supported by community
When a much smaller fire broke out in the city last month, one resident posted: “All the materials outside are flammable, I feel really worried.”
“I feel that same way” another replied. “The government has no sense of concern.”
For Poon, who dedicates much of his time to fighting lax safety standards in Hong Kong’s construction industry, the whole experience has been devastating.
“They knew all the maintenance was using corner-cutting materials, but they didn’t do anything,” he says.
“This is a man-made disaster.”
We put these allegations to Hong Kong’s Labour Department but they have not yet responded to our request for comment.
Grief may still be the prominent force here, but anger is not that far behind.