2022 Bounceback Stocks: Beaten down shares could offer great returns
WASHINGTON – With some trepidation, we offer our new list of 2022 Bounceback Stocks. What’s a “bounceback stock?” It’s a company whose publicly traded shares took a beating or suffered other indignities in calendar year 2021.
This setbacks either compelled many disappointed investors in those shares to dump them during the traditional Q4 tax-loss selling season. Or, for various reasons, other more adventurous investors chose to short these shares, following negative momentum trends for potential fun and profit.
Why 2022 Bounceback Stocks might offer nifty short-term returns
Problem is, investors may have ejected any number of these unloved stocks from their portfolios because “everyone else” seemed bent on doing the same. Alternatively, some of these dumped shares may have disappointed investors with an odd quarter or two of sub-par earnings, perhaps due to the ongoing series of Covid panics damaging their businesses on a short-term basis.
Bottom line: the mass dumpage of some of these otherwise good-to-great companies’ shares may inspire shrewder investors to take a closer look. At which point these investors may discover that a bad quarter or two may serve to hide the possibility of a nifty run of profits in calendar or FY year 2022.
In the comeback trail? Could be…
Once enough investors make this discovery in a few given stocks, the trajectory of these shares may reverse sharply, leading to nifty short-term capital gains during roughly the first quarter of the new year. Should our sharp-eyed investors catch such a move at the beginning, resulting capital gains from such investments can substantially improve any portfolio’s annual return. Or, should these gains prove more durable, the stock may continue a major upside move, increasing profitability further.
On the other hand, the game might not work out. The target bounceback company may continue to disappoint, entirely justifying the bailout of investors in 2021. As we’ve noted many times here before, nothing is guaranteed.
2022 presents an unfortunate dilemma for bounceback stock fans.
Many shares tanked late last year partially due to the never-ending Covid lockdowns, shutdowns, mask “mandates” and random school closings both Federal and Blue State governments seem to enjoy imposing.
Likewise, many investors fear that certain businesses, particularly in cyclical industries, will suffer serious damage not only from this nation’s increasingly inflationary climate. They may also suffer damage from rapidly rising interest rates, something the Fed has already promised to deliver in 2022 and beyond.
Both these very real fear factors may unexpectedly cause increased selling in our 2022 Bounceback Stocks. That could spoiling the bounceback game, leading to additional losses as the candidate stock tanks yet again.
A Caveat, of course…
So we offer this year’s 2022 Bounceback Stocks with one further caveat: With one or two exceptions, we’re not as enthusiastic over our 2022 list as we have been with previous editions. So take our 2022 Bounceback Stocks with a grain of salt and do your own due diligence before jumping in. As always, we offer these stocks as suggestions, not recommendations, given that we are considering them ourselves.
So, as they say, without further ado, let’s look more closely at our list of 2022 Bounceback stocks. Oh, and remember: the main rule for successfully investing in bounceback stocks is that you need to buy them early in the calendar year. As early as possible. That’s because if we and / or you make the right call, winning bounceback stocks tend to begin their upward run early in the New Year. So dithering or dawdling will decrease potential profitability.
2022 Bounceback Stocks (in alpha order)
Cleveland-Cliffs (NYSE: CLF):
Bouncing pretty nicely Wednesday on what’s turning out to be a horrible day on Wall Street. But it’s techs and interest rate sensitive stocks that are getting hit. CLF, our long-time neglected fave may finally be getting some of the recognition it deserves for transforming itself, quite brilliantly, from a mining company to a lean and mean vertically-integrated steel company. If you can get in the next time it drops to the $20-21 level, it could be a good bet for Q1-Q2 2022. Assuming Bidenomics doesn’t kill the entire market. Full Disclosure: We already own shares in our portfolios.
Dow Inc. (NYSE: DOW):
This long-time Dow Jones Industrials stalwart is not the unwieldy conglomerate it once was. Having merged a couple of years back with Dupont, the combined entity eventually split back into three companies. But they shuffled businesses and departments first, to better separate their combined businesses into three distinct areas. Complicated story. Dow is now back to the industrial chemicals play it once was. And better yet, it’s one of the Dow Dogs we highlighted in our previous article.
Dow should be nicely profitable in 2022. But given the fickleness of the market these days, Dow’s nearly 5% dividend could keep portfolios happy even if we find ourselves in a recession. Full Disclosure. We own shares already and we’re selective buyers of more if these shares remain under $60 per share, where they are right now.
Freeport-McMoRan: (NYSE: FCX):
US mining giant, focused on copper but with exposure to other metals including gold. It’s a little high right now, but if we can get in under, say, $39 per share, we’ll start nibbling as we think copper and gold remain undervalued. As do these shares.
Honeywell (NYSE: HON):
An industrial, commercial and technical manufacturing giant that goes way back historically, this company, which also boasts plenty of government contracts, was hit with year-end tax loss selling which makes it look like a decent bargain here. It’s buy-able right now, and CNBC’s controversial but often-right Jim Cramer agrees. But given today’s stock market beating, we might get it lower later in the week. Closing Wednesday at $211.01 per share, it’s currently off considerably from its high, earlier this year, of $236 per share. Nice. But like everything else on our 2022 list, be careful in this volatile market.
Southern Copper Corp. (NYSE: SCCO):
See Freeport-McMoRan above. Copper, gold, etc. Similar story, different mining sites. SCCO is in better fiscal shape right now than FCX, and is more highly rated right now by several analysts. But what’s most appealing right now is its fat 6.4% dividend.
One thing to watch, though… With mining interests in Chile among other international sites, both we and SCCO will need to keep a close eye on Chile’s new President-elect. A young Marxist, this one has the potential – so common in Latin America – to destroy in one or two years, the smooth running economic machine Chile fought hard to establish for many years after electing, and assassinating, its previous Marxist President, the unfortunate Salvador Allende.
Marxists and capitalist mining companies tend not to like each other. Just sayin’.
Tredegar (NYSE: TG):
This Richmond, Virginia based company manufactures aluminum extrusions, polyethylene plastic films, and polyester films. The company also manufactures PE films, flexible packaging films and aluminum extrusion segments. Reorienting after selling off an underperforming division. My brokerage house recommends this one from time to time and this investment has worked for us. They’re not recommending it right now. But others are. And its nearly 4% dividend should keep investors happy even if this market heads south, which it sure is today.
Important to note: Full disclosure, etc.
We plan to buy into several of these companies, and already own some shares in two, as indicated above. If Mr Market keeps behaving like he’s doing this Wednesday afternoon, buying opportunities in these companies could happen pretty quickly.
BTW, no techs in our current list? Yep, that’s right. We own some big tech stocks, but they got slaughtered – again in today’s market bloodbath. And, in the main, they’ve been getting it in the ear for months, more or less. Supply-chain issues, market gurus tell us, are behind this weakness. Actually, we suspect continued profit taking in this sector, and we don’t want to get back in, big time, until investors and funds stop dumping these stocks.
Two more things about investing in these or other sites’ suggested 2022 Bounceback Stocks. If you like these ideas, do your own due diligence first, before making an investment decision. And second, remember: To play bounceback stocks, similar to buying into Dow Dogs and other doggy stocks, you need to pick up shares like these very early in the New Year to get the bounce we look for in such issues. Example: CLF shares are already bouncing, even today in an otherwise lousy market. Most of any hoped-for bounce in shares like these generally peaks in Q1, although some can sustain upward momentum for longer periods of time.
Anyway, that’s the story on these turn-of-year potential 2022 Bounceback Stocks. Yes, bounceback stocks DO work. SOMETIMES. But on Wall Street, there are no guarantees.