Natural-gas producers, mall real estate investment trusts, and department stores are among the few groups of depressed stocks at the end of 2019—making them candidates for a bounce in early 2020.
The broad rally in the stock market has left few laggards behind. The S&P 500 (.SPX) is up 29% this year, and about 90% of the benchmark’s components are in the black.
That creates a challenge for investors seeking to gain, as some historically have done, by buying battered stocks at the end of the year on the idea that they were unduly dragged down by tax-loss selling and other factors and could rally in early January. The pickings are slim now.
Still, there are opportunities. Natural-gas stocks are among the worst performers in the energy sector, which has the lowest returns of any major group in the stock market this year. Record-high temperatures in parts of the eastern half of the U.S. in the heart of the winter heating season haven’t helped. Natural-gas prices are down 25% this year to about $2.25 per million BTUs, near a three-year low.
The gas stocks under pressure include EQT (EQT), Cabot Oil & Gas (COG), Range Resources (RRC), and Southwestern Energy (SWN). EQT and Range are down more than 40% this year. Gas bulls are hoping that low prices will prompt sufficient cutbacks in drilling to reduce supply and push gas prices back toward $3 per million BTUs.
Mall stocks have also been crunched amid concerns that the retail outlets are in long-term decline. Simon Property Group (SPG), the industry leader, yields nearly 6%. Taubman Centers (TCO), which owns such prime properties as the Mall at Short Hills in New Jersey, yields 9%, and Macerich (MAC) yields more than 11%. Taubman and Macerich are down over 30% this year.
Retailers generally are having a good year, but department stores are the exception. Macy’s (M), which is down 44%, is the second-worst performing stock in the S&P 500— Abiomed (ABMD) is the worst—and yields 9%. (Barron’s wrote skeptically on Macy’s recently.) Other losers this year include Kohl’s (KSS) and Nordstrom (JWN), although Nordstrom has rallied about 50% from its low this fall.
Outside the U.S., investors are cool to telecom stocks like Vodafone Group (VOD), Deutsche Telekom (DTEGY), and China Telecom (CHA). Barron’s wrote favorably on China Mobile (CHL) this past weekend. Deutsche Telekom owns a valuable stake in T-Mobile US (TMUS).
A strategy of buying the five biggest losers in the S&P 500 from 2018 at the end of last year would have yielded a nice payoff. The five— General Electric (GE), L Brands (LB), Coty (COTY), Perrigo (PRGO), and Mohawk Industries (MHK)—all rallied at the start of 2019 and four of the five are still in the black for the year. L Brands has lost ground, but GE and Coty are up more than 50% this year.
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