There hasn’t been a January effect rally in shares of Ply Gem (PGEM). In fact, it has been quite the opposite. Shares are down a whopping 25% during the month. For a stock I rated as on of the Top 10 Sizzling Stocks, such a move is painful, but not disastrous. Sizzling Stocks are meant to be held for the duration of the year and we have 11 months to go. Small-cap stocks like Ply Gem can move sharply one direction or the other.
The reason for the decline at the start of the year was a Wall Street downgrade. JP Morgan took the stock to Neutral from Overweight, citing near-term operating challenges. Really what triggered the downgrade was preliminary fourth-quarter sales that were lower than what the bank expected. For a small-cap stock, such a misstep can be overly penalizing and that is what happened to Ply Gem.
Thinking a bit longer-term, a strong housing market this spring can turn this stock around on a dime. I liked the stock a lot in before the year started. I absolutely love Ply Gem today!