As we exit a wonderful (if chilly) Thanksgiving weekend, we enter that most wonderful time of the year -- if you are outperforming. For the underperforming portfolio manager, December is without a doubt the most stressful time of the year. Unless you can hit the ball out of the park in several names in one month, you have no hope of catching up to your benchmark -- which is not cooperating this year, by the way, thanks to this continuous rally. You also have no hope of a bonus, which means your spouse is going to be very angry when you cancel the ski trip to Colorado and forfeit the deposit on the new boat. But hey, if you are lucky you may hold on to your job for one more year.
In an attempt to help the poor, huddled, miserable masses of underperforming PMs, here is a quick look at some ideas that may be "coiled springs." As all you Wall Street old-timers know, "coiled springs" hold a special place in the lexicon of the Street. When an analyst is a true believer in a stock that is performing horribly, the analyst often describes it as a coiled spring. Wound ever tighter, it has more and more energy stored, just waiting to explode to the upside when some catalyst releases it.
Below is a great set of coiled springs. All of them have seen their earnings estimates rise smartly over the past two months, yet their stocks are severely lagging the indices. The market may not understand the strength of the underlying fundamentals in these names, and the slightest change in sentiment could send them soaring -- just what our poor lagging PM needs to save Christmas!
Now, don't all of you just rush out and buy these without doing any research. Coiled springs have potential, but they also have risk. These names could be lagging for any number of reasons. Tesla (TSLA), for example, has great earnings momentum but a nosebleed valuation. Or there's Kinross Gold (KGC) and Newmont Mining (NEM), which are tied to a falling commodity, a case for which earnings are often a lagging indicator. Other names may have blown out last quarter's earnings, but management teams may have guided down.
After you sort through the names with reasons to lag, you will be left with a group that likely has one or two names that can make your holiday wishes come true. Facebook (FB) has great business momentum and is not overly expensive, but investors are worried about it losing cache amongst the teen set. Perhaps those fears are warranted, but the company is only beginning to monetize the billion non-teen users it has. Sina (SINA) and Ctrip (CTRP) have great earnings but may be influenced by the macroeconomic concerns around China. Those are not irrelevant, but Internet names have a long way to grow in a market as large and immature as China.
Dig for gold in this list, with the operative word being "dig/" It may do wonders for you. We will revisit it at the end of the month to see if the screening process was useful.