Despite already having had a massive year, the market continues to rise through the holidays. Equities hit new all-time highs this morning as nearly every sector enjoyed a moderate lift, before dipping slightly by midday.
And though most stocks joined in on 2019’s bull market, others missed the boat entirely. Natural gas producers, mall REITs (real estate investment trusts), and department stores were among the “biggest losers” of the last 12 months. Simon Property Group (NYSE: SPG), a mall REIT, fell 12.55% on the year, while other REITs (office, industrial, residential, etc.) soared on rock-bottom interest rates.
The S&P is up 29% this year. 90% of its component stocks have seen gains as a result – making the underperformers a true anomaly in what’s been a very bullish timeframe.
Even in the wake of several trade war “road bumps” that temporarily crunched the market.
And when stocks are almost unilaterally trading higher, it becomes more difficult for investors to find the next group of overachievers. Almost everything looks overbought, and for value-seeking bulls, the field has severely narrowed.
But that doesn’t mean there isn’t any low-hanging fruit, though. There certainly is – it’s just a little riper than most investors would likely prefer.
Tanger Factory Outlet Centers (NYSE: SKT) – much like Simon Property Group – is another mall-focused trust that finds itself at the bottom of the barrel. Boasting a 25% yearly loss, SKT is finally starting to turn things around after months of frustration for shareholders. The stock hit its 2019 low in late August and has attempted several recoveries since then. Another surge, likely coming in early 2020, could be the one that sticks.
From the natural gas sector, Southwestern Energy Co (NYSE: SWN) has significant rebound potential as well. The stock dropped 32% this year, capping off a 96% collapse that began in 2010. And just like SKT, SWN bottomed out in August before rising in Q3/Q4. Now, after stopping the bleeding, SWN appears vastly oversold – something that should appeal to bulls burnt-out on growth stocks.
Last, but certainly not least, we have Macy’s Inc (NYSE: M), a department store that’s been skewered by America’s shift away from mall shopping. Online retailers – Amazon (NASDAQ: AMZN), in particular – have stolen much of Macy’s thunder over the last few years. 2019 was no exception. M plunged 44% this year, marred by poor earnings and continued “anti-mall” sentiment. But like SKT and SWN, M also bottomed out in August before staging several micro-recoveries. Heading into 2020, M appears vastly oversold, opposite the many other retailers that look “overcooked” by comparison. Should M finally produce a rally that endures through Q1, the next few quarters could be huge for shareholders.
So, as stocks enter the new year, keep an eye on these three serial underperformers. 2019 wasn’t kind to the stocks listed above, but with a bit of patience – and continued market-wide prosperity – investors could be treated to some major bullish rebounds.
Provided, of course, that the U.S. economy remains strong. If America’s base of rabid consumers starts to wane, everyone’s likely to feel a little pain as a result.
Even those of us who took a shot on the “stinkers” of last year.
