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?
On Friday, Paola Paiva waited in a hotel near Caracas airport, nervous but giddy with excitement to be reunited with her brother, finally.
For five months, Arturo Suarez has been detained in a notorious prison in El Salvador.
“I am going to wait for my brother to call me,” she told Sky News, “and after giving him a hug, I want to just listen to him, listen to his voice. Let him talk and tell us his story.”
Suarez was one of the more than 250 Venezuelan migrants who had been living in America but were arrested in immigration raids by the Trump administration and sent to El Salvador, a showpiece act in the president’s promise to deport millions of migrants.
Image: Paola Paiva holds a vigil for brother Arturo Suarez. Pic: Reuters
Most of the men had never even been to El Salvador before. Their detention has been controversial because the White House claims the men are all part of the dangerous Tren de Aragua gang but has provided little evidence to support this assertion.
The only evidence Paola had that Suarez was still alive was a picture of him published on a news website showing the inside of the maximum security CECOT jail.
He is one of dozens of men with their hands and feet cuffed, heads shaved and bodies shackled together.
More on El Salvador
Related Topics:
Now he is returning to his home country, one of the bargaining chips in a deal that saw the release of ten Americans and US permanent residents who had been seized by the Venezuelan authorities.
Image: Venezuelans arrive back in home country after being detained in El Salvador
Paola had tried to go to the airport to greet her brother as he disembarked a charter plane bringing the men back from El Salvador but authorities told her to wait at a nearby hotel.
“They told us they are taking them all to a hotel to rest,” she said.
“But I managed to get someone to give my phone number on a piece of paper to my brother, so I am expecting his call tomorrow, as soon as he can access a phone.
“We heard they are going to perform some medical exams on them and check their criminal records,” she added. “I’m not afraid; I’m not worried since my brother has a clean record.
“I am so happy. I knew this day would happen, and that it would be unexpected, that no one was going to notify us. I knew it was going to be a total surprise.”
Image: US citizens released from Venezuela. Pic: Reuters
The Trump administration had paid the El Salvador government, led by President Nayib Bukele, millions of dollars to imprison the men.
Homeland security secretary Kristi Noem visited CECOT last month, posing in front of prisoners for a photo opportunity.
But Cristosal, an international human rights group based in El Salvador, says it has “documented systematic physical beatings, torture, intentional denial of access to food, water, clothing, health care,” inside the prison.
A video which was seemingly filmed aboard the charter flight bringing the Venezuelan migrants back to Caracas shows Arturo briefly talking about his experience inside.
He looks physically well but speaks into the camera and says: “We were four months with no communication, no phone calls, kidnapped, we didn’t know what (the) day was, not even the time.
“We were beat up at breakfast, lunch and dinner,” he continues.
Sky News interviewed Arturo Suarez‘s brother Nelson near his home in the US in April, weeks after Arturo – an aspiring singer – had been arrested by immigration and customs enforcement (ICE) agents while filming a music video inside a house.
Nelson said he believed Arturo’s only crime was “being Venezuelan and having tattoos.” He showed me documents that indicate Arturo has no criminal record in Venezuela, Chile, Colombia or the United States, the four countries he has lived in.
Now Nelson is delighted Arturo is being released – but worries for his future.
“The only thing that casts a shadow in such a moment of joy is that bit of anger when I think that all the governments involved are going to use my brother’s story, and the others on that flight, as political gain,” he said.
“Each of them will tell a different story, making themselves the heroes, when the reality is that many innocent people suffered unfairly and unnecessarily, and many families will remain separated after this incident due to politics, immigration and fear.”
At least 34 people have died after a tourist boat capsized in Vietnam, according to state media reports.
The Wonder Sea boat was reportedly carrying 53 people, including five crew members, when it capsized due to strong winds in Ha Long Bay on Saturday.
It happened at roughly 2pm local time (7am GMT). Rescue teams have found 11 survivors and recovered 34 bodies, eight of them children, the state-run Vietnam News Agency said, citing local authorities.
Image: Rescuer in Ha Long Bay are searching for survivors. Pic: QDND via AP
The People’s Army Newspaper, which cited local border guards, said authorities have not yet confirmed details about the tourists, including their nationalities, as the rescue operation continues.
Most of the passengers were tourists, including about 20 children, from the country’s capital city, Hanoi, the newspaper said.
The incident comes shortly after the arrival of Storm Wipha in the South China Sea, bringing strong winds, heavy rain and lightning to the area.
Image: A body being carried on stretcher after a tourist boat capsized in Ha Long Bay, Vietnam. Pic: QDND via AP
The named storm is the third typhoon to hit the South China Sea this year, and is expected to make landfall along the northern coast of Vietnam early next week.
More on Vietnam
Related Topics:
Disruptions linked to the storm have also had an impact on air travel, according to Noi Bai Airport.
The airport reported that nine incoming flights were diverted to other airports, while three outgoing flights were temporarily grounded due to adverse weather conditions.
Image: Tourist boats cruise in Halong Bay. File pic: Reuters
The winds brought by Storm Wipha reached up to 63mph (101kmph) and gusts of up to 68mph (126kmph) as it passed south of Taiwan on Saturday, according to the island’s Central News Agency.
More than 30 people have been killed after Israeli troops opened fire towards crowds of Palestinians waiting for aid, according to witnesses and hospital officials.
The deaths occurred near distribution hubs operated by the US-Israeli-backed Gaza Humanitarian Foundation (GHF), which began distributing food packages in Gaza at the end of May, after Israel eased its 11-week blockade of aid into the territory.
At least 32 people were killed on Saturday, according to the Hamas-run Gaza health ministry, while a further 100 people were injured, according to local reports.
Most of the deaths came as Palestinians massed in the Teina area, around 3km (2 miles) away from a GHF aid distribution centre east of the city of Khan Younis.
Image: More than 30 people killed near aid distribution centres. Pic: Mariam Dagga/AP
Mahmoud Mokeimar said he was walking with crowds of people – mostly young men – towards the food hub when troops fired warning shots as the crowd advanced, before opening fire towards the marching people.
“It was a massacre… the occupation opened fire at us indiscriminately,” he said.
Image: Injured Palestinians are brought to Nasser Hospital in Khan Younis. Pic: Mariam Dagga/AP
Akram Aker said troops fired machine guns mounted on tanks and drones.
More on Israel-hamas War
Related Topics:
“They encircled us and started firing directly at us,” he said.
The Nasser Hospital in Khan Younis said it received 25 bodies, along with dozens of wounded.
Seven other people, including one woman, were killed in the Shakoush area, hundreds of yards north of another GHF hub in Gaza’s southernmost city of Rafah, the hospital said.
The army and GHF did not immediately comment on Saturday’s violence.
Follow The World
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
The GFH, which has four distribution centres, three of which are in the southern Gaza Strip, says it has distributed millions of meals to hungry Palestinians.
But local health officials and witnesses say hundreds of people have been killed by Israeli army fire as they try to reach the distribution hubs.
The GHF, which employs private armed guards, says there have been no deadly shootings at its sites, though this week, 20 people were killed at one of its locations, most of them in a stampede.
The group accused Hamas agitators of causing a panic, but gave no evidence to back the claim.
The army, which is not at the sites but secures them from a distance, says it only fires warning shots if crowds get too close to its forces.
The 21-month war in Gaza was triggered when Hamas militants stormed into southern Israel on 7 October 2023, killing 1,200 people and taking 250 others hostage.
An Israeli military offensive has killed more than 58,000 Palestinians, according to the Gaza health ministry, while Gaza’s more than two million Palestinians are living through a catastrophic humanitarian crisis.
Israel and Hamas have been holding ceasefire talks in Qatar in recent weeks, but international mediators say there have been no breakthroughs.
US President Donald Trump said another 10 hostages will be released from Gaza shortly, without providing details.