If you’re a contrarian investor looking for some stocks to buy, then the most likely candidates are gold miners, coals stocks, or the emerging markets, since they all struggled this past year. However, maybe you should take a look at a few other stocks that took their lumps this past year instead.
Take First Niagara (FNFG) for example, which operates retail and commercial banks in the New York area. Its stock was hammered when they named a new CEO. They took the interim label off Gary M. Crosby, and named him president and CEO but Wall Street was expecting someone from outside the bank to take over, so the stock was shot down from $10.80 a share to $10.20. That drop seems like an over reaction for a new CEO taking over. Most say the old CEO was kicked out because of expansion that didn’t pay off as planned. Crosby though has said that he plans to “drive operational excellence and organic growth” and not expand any further.
And, usually, when a new CEO comes on board they put their money where their mouth is, so to speak, and buy a big block of shares. Let’s wait and see if this is the case for Mr. Crosby. Although it looks like insiders are starting to buy their own shares and no sales have been made in quite some time, Crosby hasn’t stepped in to buy shares yet. But, you do get a nice dividend of over 3% while you wait for the stock to recover.
First Niagara has some worries though, mainly about growing too fast too quickly. They bought a lot of smaller banks the past few years and now have to integrate them. Moody’s put the banks rating on watch for a downgrade, largely due to the expansion of the bank and thus their capital position. First Niagara bought 195 branches from HSBC for $1 billion and cut their dividend to help fund the deal. But First Niagara sold 26 of the former HSBC branches to Key Corp, to resolve fair competition stipulations. Overall, it appears like First Niagara is now ready to integrate and streamline their banks. And with the housing recovery well under way, First Niagara should see positive growth going forward. Moreover, the rise in interest rates should help them earn more money on all their loans. So, if loan growth continues and interest rates rise, it all bodes well for a streamlined First Niagara.
Then there’s mining equipment maker, Joy Global (JOY), who not too long ago traded at close to $100 a share, now the stock is worth half that. What happened? Is all because of the slow down in China? Perhaps. But won’t China turnaround and figure out a way to maintain growth? Heck, if China continues to grow at a 7% rate that should help stabilize the construction and mining industries. And won’t the Brazilian economy grow in the years to come, what with the World Cup and the Olympics on the horizon forcing them to build and expand their infrastructure? And then there’s Europe, who’s economy is stabilizing. And in the United States, one could say there’s almost a housing shortage in some areas. All this should help Joy Global.
To compare, look at how Caterpillar paid $92 a share for Bucyrus, $7.6 billion, which was Joy Global’s main competitor in the mining equipment space. Right now, Joy Global has a market cap of just $5.68 billion. Goldman Sachs even has Joy Global at a sell rating, saying there’s an excess supply of iron ore, coal and precious metals and along with an equipment over supply. Goldman’s price target for the stock is $52. Ouch. The question though is it time to buy now, or will Joy Global just muddle along and go lower. To me, it seems like you have to buy when all the sell calls are in, and not when everyone says Joy Global is a buy. Although there’s is at least one pundit on TV who likes Joy Global, Stephanie Link, of CNBC and Jim Cramer’s Charitable Trust, she says China has stabilized and she likes the companies restructuring plans.
For Lululemon (LULU), like First Niagara, it also has a new CEO at the helm. Laurent Potdevin is the new yoga pants maker leader, who will certainly have to address all the issues surrounding Lululemon, from the see-through pants controversy to the founder saying fat women shouldn’t wear their Yoga pants. Sure, the issues will have to be handled to perfection, but implementing a new CEO and pushing the founder back was a big step in the right direction. Lululemon’s board was smart, it’s better to start fresh and move on with a new CEO than let the issues linger. Now it’s about international growth, and Potdevin, who worked at TOMS, Burton, and Louis Vuitton, where he led the expansion and growth of all three of those unique brands, is a nice fit. Right now, Lululemon is concentrated in the United States, with roughly 200 stores, but wants to open more stores in Europe and Asia in the years ahead. If new CEO Potdevin can settle all of the bad press and lead an expansion in Europe and Asia, shares of the yoga pants maker should rise. And wisely, Lululemon tests new markets before they open new stores by seeding the area with sort of popup stores and yoga events to gauge the areas interest. The trend of exercising and doing yoga remains in Lululemon’s favor, which is also why they’re opening new stores aimed a young athletic girls, called Ivivva Athletica. Moreover, what with wearable technology on the horizon, you’d think thiswill align well with Lululemon’s work-out aimed gear. Plus, they plan to expand into more Men’s active wear and a golf clothing line. And while Nike and Under Armor have chased Lululemon with their own yoga wear, there’s still the allure for one of these companies wanting to own the Lululemon brand outright, especially with the stock at these levels.That’s the issue though, at what level is the stock a buy. The stock market has a way of chopping down companies as they adjust and reshape their strategies. Sure, it might take a few quarters for Lululemon to turn it around. It’s wise to buy a portions of shares at these levels and almost hope it goes lower so you can buy more. What’s true about Lululemon though is they have a good product in a niche that as a trend is gaining popularity. Who even did Yoga 20 years ago that you knew?
And speaking of trends, next up is Tibco Software (TIBX), which got chopped from $25 down to $21 after the company announced poor guidance and weaker margins. But Tibco is in right smack in the center of a few big trends: big data, mobile, and cloud software services. All of these services are what companies need and desire if they’re going to compete in a track every data point available type of economy.
Do you like a confident CEO? Well, if so, then you’ll like Tibco because their CEO said this after the stock took a hit, “I believe this is going to be the biggest opportunity since the stock was five dollars”. Why? Because he said Tibco is focused on growth areas like mobile and the cloud-those popular trends again. And as a stockholder it doesn’t hurt to have the CEO on Twitter, you can follow along Vivek Randadive’s tweets if you like.
Again, what’s interesting about a company like Tibco is it’s a part of the rising trend of big data, where you can analyze everything and anything to gain more knowledge about your business and customers. And, Tibco isn’t focused on one industry, but across all platforms in all sectors, from health care to banking to the airline industry use their software to enhance their businesses.
However, I do have a big question for Mr. Vivek Randadive: if his stock is so cheap, why doesn’t he step in a buy some more shares? And that what’s strange about Tibco and Vivek Randadive, why did he sell 320,000 shares at $24.03 for a total of $7,689,600? If he thought the stock was so cheap after the sell off recently, why did he sell before the news came out. Do we believe Mr. Vivek Randadive or was all that just CEO bravado talking about his stock being cheap? Before you step in and buy shares of Tibco it would be nice to see just why he was selling all those shares. That said, Tibco does have a $300 Million share repurchase program in place.