The trading year is over, and for so many companies, closing the books on 2011 couldn’t come fast enough. The volatile year caused a lot of former market stalwarts to tumble during the past 12 months, but now the question is which battered market stars will be able to mount a comeback. For this assignment, I polished my crystal ball and tried to foresee which stocks have the potential to shed their bearish robes and jump back on the bull in the year to come. Here are four comeback kid stocks for 2012:
First Solar
The solar sector suffered third-degree burns in 2011, with industry leader First Solar (NASDAQ:FSLR) sinking almost 75%. The stock’s decline really heated up in December when the company lowered its 2012 outlook. So why should we think First Solar’s shares could be one of the comeback kid stocks in 2012?
Well, because demand for solar panels remains high. In Q3 we saw record-setting U.S. solar installations, with 449 megawatts of PV installed in the U.S. alone. Installations in Q4 are predicted to be even bigger, and industry analysts think there will be a substantive acceleration in solar PV installations in the U.S. over the next five years due to a classic combination of decreased solar installation costs and increased solar demand.
There will be growth in the solar sector in the months and years to come, and once the market recognizes this growth, the sun could rise again on First Solar shares.
Goldman Sachs
It was a tough year for the financial sector in 2011. Some of the biggest names in the business got taken to the woodshed by investors, including Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS). Even the most savvy, most politically connected financial firm, Goldman Sachs (NYSE:GS), had a terrible time of it in 2011.
Goldman shares are down 46% for the year, but in 2012 Goldman is likely to flip that script. For Goldman, 2012 is going to be a transition year, as the firm deals with a new set of proposed financial rules governing bank holding companies. Once the rules are set, the smart people at Goldman can get back to the business of making money. If they succeed, look for GS shares to surge in 2012.
China 25 Index
Chinese stocks were rocked in 2011 by growing fears that the country’s economy represented an unsustainable bubble waiting to burst. Then there were the many Chinese companies that tanked due to bogus financial data, and even criminal malfeasance. The negative perception, when it comes to investing in the country’s market, caused the iShares FTSE China 25 Index (NYSE:FXI) — the benchmark measure of quality Chinese stocks — to sink 19% this year.
This trend definitely could reverse course in 2012, as China moves to loosen its purse strings and make more capital available. In 2011, Chinese policymakers forced banks to increase loan reserve requirements to control inflation. That move worked, and now China is back to adopting friendlier lending standards. In fact, we will likely see an interest-rate cut in China in the first quarter, and that almost certainly would spark some major buying in FXI.
Potash
This fertilizer stock stunk up Wall Street in 2011, as industry leader Potash (NYSE:POT) fell almost 20%. The company struggled to keep up with competitors such as CVR Partners (NYSE:UAN), but many analysts now think Potash is poised for a recovery.
Potash has nearly completed spending on its huge Brownfield expansion program, and that will put it into position to start taking better advantage of high potash prices, and what will likely be a record year in terms of global demand. The company is expected to see EPS growth of about 19% in 2012, and given its current price, POT shares really could begin to smell like roses and be one of the best comeback kid stocks of 2012.
This article originally appeared on Traders Reserve.
