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%
Read now: Golds Record High: Why Havent Gold Miners Followed Suit?
It was a rare window into confrontations most have viewed from afar. We were invited on board the Philippine Coastguard Vessel BRP Bagacay.
They were on a resupply mission to Scarborough Shoal – a submerged reef which Chinaclaims as its own but is within the Philippines’Exclusive Economic Zone.
They were meant to be dropping off food and fuel to fishermen who rely on the lives beneath these waters. But they knew, as did we, that this journey was about far more.
It felt as if they wanted to show the world they were willing to stand up to Beijing if Chinese ships tried to block their path.
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We got on the ship on Monday afternoon. By dawn the following day, the tension was already apparent.
Two ships were already trailing behind our vessel – more than three hours away from Scarborough Shoal.
There has long been a game of brinkmanship in this waterway – where about one-third of the world’s shipping passes through. But this felt more choreographed and intense than it has for some time.
Soon, the captain told us 12 ships were encircling our vessel.
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They swerved in front of the Philippine crew, who exchanged warnings over the radio.
On the deck, the crew rushed towards buoys every time the Chinese edged closer – trying to protect themselves in case there was a collision. We could see the Chinese crew taking pictures – just metres away from us.
Then suddenly, a volley of water was fired at the boat. The force of it seemed to take even the experienced crew on board by surprise.
We were on the stern of the vessel and got soaked. As we were ushered inside, the roof of part of the deck that some of us had spent the previous night sleeping on was ripped apart. Despite the damage, the water cannons continued to fire.
Within hours the Chinese coastguard was trying to get the first word out to the world about the incident.
They say the Philippine vessel we were on has been “expelled”.
The team on board the Philippine vessel tell us they’re turning back because the other ship they were travelling alongside has had its radar damaged by the water cannons.
Pro-Palestinian protesters took over a university building in the US – the latest escalation of demonstrations at college campuses against the Israel-Hamas war.
The demonstrators barricaded the entrance of the building at Columbia University in New York on Tuesday and unfurled a Palestinian flag out of a window.
Video footage showed protesters on the Manhattan campus locking arms in front of Hamilton Hall and carrying furniture and metal barricades to the building.
A group called Columbia University Apartheid Divest (CUAD) said Hamilton Hall was now called “Hind’s Hall” in honour of Hind Rajab, a six-year-old girl killed in a strike on Gaza in February.
The student radio station broadcast a play-by-play of the hall’s takeover, which occurred nearly 12 hours after a deadline for the protesters to leave an encampment of around 120 tents or face suspension.
Demonstrators said they planned to remain at the hall until the university conceded to the CUAD’s three demands: divestment, financial transparency and amnesty.
One protester, a 22-year-old student who did not wish to be named, told Sky News she has relatives in Gaza and she will “not stop attending protests until the war ends and (Columbia University) agrees to divest”.
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Israel-Hamas war divides US universities
“We have Jewish, Christian, Muslim people of faith and people of no faith standing with me, holding my hands in solidarity with the injustice that is happening in Palestine,” she said.
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“If we have to be here all day we will, we need peace and we need justice. They are threatening to suspend us but we are standing up for human rights.”
Dozens of people were arrested on Monday during protests at universities in Texas, Utah, Virginia and New Jersey, while Columbia said hours before the takeover of Hamilton Hall that it had started suspending students.
Police moved to clear an encampment at Yale University in Connecticut on Tuesday morning, but there were no immediate reports of arrests.
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The campus protests began as a response by some students to Israel’s offensive in Gaza after Hamas launched a deadly attack on southern Israel on 7 October.
London Ambulance Service said they treated five people at the scene and took them to hospital – including the 14-year-old boy.
In an update this afternoon, Chief Superintendent Stuart Bell, who leads local policing, confirmed the teenage boy had died.
He said: “He was taken to hospital after being stabbed and sadly died a short while after.
“The child’s family are being supported firstly by my local officers and now with some specialist officers and everyone across the Met is keeping them in our thoughts at this unimaginably difficult time.”
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Chief superintendent Stuart Bell giving his update
He also confirmed two other members of the public were in hospital with injuries believed to be not life-threatening.
Along with them, two officers received “significant” but not life-threatening injuries and will undergo surgery, the police chief said.
Officers arrested the man 22 minutes after the first call went into emergency services.
Eyewitnesses described hearing shrieking and seeing someone receive CPR at the scene.
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Video showed a man wielding a large sword outside a number of residential properties.
Police added they did not think it was a targeted attack, or terror-related, and they were working to establish the circumstances of what took place.
As the press conference ended this afternoon Ch Supt Stuart Bell refused to respond to questions over whether the suspect had been previously arrested.
Chris Bates told Sky News he saw police apprehend a suspect wielding a “big samurai sword”.
He said that, after confronting the suspect, police screamed at them to drop the sword, before they Tasered him, and “piled on top of him”, arresting him.
Another local resident said she saw a body on the ground as she hid by her window, while a sword-wielding man shouted “do you believe in God?” outside her home.
The witness, who didn’t want to be named, said: “He was wielding his sword trying to attack the police but then they sprayed him and he ran away.
“He was shouting at the police ‘do you believe in God?’, also at the ambulance.
“We were very scared and trying to hide and not show ourselves through the window, because he was standing right next to our house and he could have seen us if he looked up.
“We were trying to hide but also at the same time taking video of him attacking the police, and of the body on the floor, so, yeah, we were very scared and we didn’t know what to do.”
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The King has asked to be kept informed of the incident and has sent his thoughts to those affected.
A Buckingham Palace spokesman said: “Following the horrific scenes in Hainault this morning, the King has asked to be kept fully informed as details of the incident become clearer.
“His thoughts and prayers are with all those affected – in particular, the family of the young victim who has lost his life – and he salutes the courage of the emergency services who helped contain the situation.”
Politicians were quick to offer their condolences after news emerged of the attack.
Prime Minister Rishi Sunak said: “This is a shocking incident. My thoughts are with those affected and their families.
“I’d like to thank the emergency services for their ongoing response, and pay tribute to the extraordinary bravery shown by police on the scene. Such violence has no place on our streets.”
Local MP, and Labour shadow minister, Wes Streeting said the whole community was “devastated” by news of the attack but “deserved answers”.
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Mayor of London Sadiq Khan praised the “everyday bravery” of the police officers who ran towards the sword-wielding man.
He added: “This attack is devastating and appalling. I’m sure I speak on behalf of the entire city when I say my thoughts and prayers are with this young child and his family.”