WASHINGTON – In an earlier article, I listed my preliminary “Dogs of the Dow” list for 2020. These are the stocks in the Dow Jones 30 Industrials that pay the highest dividends. Investing in them frequently (but not always) results in decent early gains in these stocks after the New Year begins. Today I offer another list, one that’s smaller and iffier this year due to a variety of factors. It’s our list of 2019 Year End Bounceback Stocks for 2020.
Why Bounceback stocks?
The purpose of the 2019 Year End Bounceback Stocks list is similar to that of the Dow Dogs. Like the Dow Dogs, these bounceback stocks have, rightly or wrongly, been beaten down by the sellers this year and in Q4 2019. They are now priced, in many cases, below their historical normal Price Earnings (PE) ratios. Or, in some case, they’re priced below book value.
All of which means that the right bounceback stocks historically give investors a 10-20% gain in the first 4-8 weeks of the new calendar year. Again, though, this is by no means guaranteed. It just means that your odds might be a bit better than average for a quick “bounceback” gain.
On the other hand, if investors hated the XYZ Corp this year, they might still hate it in January. You never know. But the odds are decent you’ll get at least some kind of bounce out of good bounceback candidates.
I come up with my annual list by culling the annual lists of any number of investment services and brokerage houses. That’s because bounceback candidate stocks are sometimes hard to find. So there’s certainly no harm in seeing what many of the big time pro analysts have come up with as their candidates this time of year.
This year’s 2019 Year End Bounceback Stocks are peculiar
This year’s 2019 Year End Bounceback Stocks are a peculiar batch. They’re mostly well-known, large cap companies, many of which pay great dividends. But for a variety of reasons, I’m not quite sure why analysts figure they’ll make Wall Street’s bulls happen during the first several weeks of the New Year. That’s mainly because stocks in general have enjoyed historic gains during the nearly-ended Q4 2019. I think that January’s markets could open up with a big selloff, given that no one wants to take their outsized gains in 2019, due to tax issues.
So, companies that have really been on the mat this year may see a recovery in 2020. But maybe not in January.
My second issue here, which I’ll deal with on the side, is the insistence by some analysts that really big gains are on the way for stocks riding this year’s big legalized marijuana wave. Except that there has been NO big legalized marijuana wave. All the maryjane stocks analysts touted last year tanked in 2019. Big time. With US marijuana laws still tangled, and with plenty of gray and black market weed for sale nearly everywhere, all those publicly traded Ontario Gold companies, mostly Canadian shares, have done poorly. Why would they do well next year when the same conditions are likely to prevail?
In a separate column, we’re going to feature a short list of marijuana stocks that many analysts have been touting for a comeback in 2020. Just in case some investors out there want to roll the dice as the year turns. Investing in these stocks, however, should adhere to one very important rule: Don’t bet the rent money on them.
Okay. With that said, let’s get started on our short list of…
2019 Year End Bounceback stocks for 2020
As noted above, this year’s list unusually consists of big cap stocks that really do have decent odds of recovery early in 2020. Unless, of course, we get that nasty January profit-taking smackdown I’m worried about. Anyhow, here goes, in no particular pecking order.
AT&T (trading symbol: T)
This big old telco has experienced its fair share of media rebirths since the original AT&T was broken up into “baby bells” in the 1980s. But the current AT&T has been transformed way more than most, having acquired a slew of big media properties and brands in recent years that make this one much, much more than just an old-fashioned telephone company. Investment analysts, however, have been skeptical, questioning whether a bunch of telephone guys have the savvy to manage a package of often nutty media companies. Which would make these shares soar, theoretically at least. Time will tell.
But, in the meantime, investors can collect AT&T’s big, fat, telephone era sized dividend, currently 5.3% We’ve actually had T in our portfolios for the better part of 2 years and are ahead on the shares. We plan to hold them a while longer. So if there’s a decent ride that’s not yet priced in to these shares, we’re good to go. Fingers crossed.
Ford Motors, the only one of the former big 3 US automakers that didn’t get a bailout from the Feds in the Great Recession, is radically refreshing its product line, heading into electronic vehicles (EVs) in a big way, and continues to pay a really big dividend, with shares currently yielding 6.41%. We’re still dubious on the EV thing over all. But Ford generally makes a better-than-average product, should sell a lot of cars in 2020. And with a PE ratio of only 7.58 – lower than the PEs of some banks and utilities – Ford shares have room to move in 2020.
Walgreens Boots Alliance (WBA)
We know this drugstore conglomerate as Walgreens. The new name was due to a buyout and merger with a big European drug alliance emporium. The deal was such a big one that this stock ended up in the Dow Jones Industrials. Unfortunately, earnings haven’t exactly been spectacular this year, deterring many investors from taking big bets on the shares. But, with a low PE of 9.96 as of today, and a decent dividend yield of 3.1%, WBA could be poised to catch up to its big time rival CVS in 2020. Or at least get close to its 52 week high of $71 and change. Its recent acquisition of some of Rite-Aid’s better stores this year begin to bear fruit in 2020. Or so bounceback investors hope.
Western Digital (WDC)
This big hard disk drive manufacturer was dumped earlier this year by investors who increasingly think its major product is on the decline and soon to be obsolete. And indeed, PCs and Macs are both moving rapidly toward using Solid State Drives (SSDs) in these machines instead of hard disks.
But WDC has actually got you covered. That’s because data centers are still continuing to buy inexpensive hard disk storage arrays by the bucket load. And, in the meantime, addressing the SSD issue, WDC rather cleverly bought out SSD king SanDisk a couple of years ago. Which means that WDC is now selling plenty of SSDs as well. Storage is not going away anytime soon. And should sales continue to hum for this company in 2020, its always-volatile shares could be quite rewarding. Its PE is currently 23.89 – not a big PE for a stock in the tech sector. But better yet, its dividend yield is currently 3.22%, pretty darn good for a tech company.
That’s a wrap for our list of 2019 Year End Bounceback stocks that COULD be ready to rock and roll in early 2020. Travel at your own risk. But this year’s companies have been around for awhile. So they could be somewhat less risky than others we’ve highlighted in years past. Try them or not. It’s your choice, since we don’t actually give stock recommendations in this column.
— Headline image: Times Square New Year’s Eve Ball Drop, 2013. (Image via Wikipedia entry on this topic, CC 2.0)