As we enter the final two weeks of 2013, the S&P 500 is up 28% year-to-date through Dec. 16. In a quick screen of 3,200 stocks with market caps above $300 million, a total of 259 have doubled in price in 2013.
However, those kinds of returns aren’t going to be easy to repeat. Most Wall Street types expect 2014 to produce more moderate returns somewhere around 10%, thanks to high valuations and expected tapering from the Fed.
With market returns expected to be more than half what they were in the past year, investors definitely have their work cut out for them trying to find high-performing stocks for next year. But we’ve tried to do the hard work for you: Here are five stocks that could double in 2014.
Once upon a time there was a company named TiVo (TIVO) that made TV set-top boxes. I didn’t realize it was still around, but it is — with a meager 1% gain in 2013. But it’s business is coming around thanks to Roamio, its all-new digital video recorder (DVR).
The company describes Roamio as part cable box, DVR, Apple TV and Slingbox. The Roamio, when applied to TiVo’s iOS app, allows you to stream shows live or pre-recorded through your iPhone or iPad out-of-home. According to Stewart Wolpin of Device.com, “Roamio is the only ‘cable’ set-top box offering both out-of-home DVR and ‘live’ streaming. I’m not a huge TV watcher away from home but I get the significance.”
I like TIVO because it’s growing subscribers, it has over $1 billion in cash, its shares didn’t move in 2013, it’s making more money this year than last, and it has new technology that could be a game changer.
Trading at 1.5 times cash, it’s worth a shot. Just don’t blow your retirement on it.
Tata Motors: Jaguar and Land Rover
India’s Tata Motors (TTM) bought the two luxury car makers from Ford (F) in June 2008 for $2.5 billion. Since then, the two car makers have brought out some very nice vehicles including the Range Rover Evoque and Jaguar F-Type. Since the acquisition, Tata stock is up 149% compared to 29% for the S&P 500. However, most of the gains came in 2009 when investors realized Tata made a very good deal.
In the second quarter, Jaguar Land Rover wholesale volumes grew by 31.6% year-over-year to 101,931 vehicles worldwide. Jaguar’s wholesale volume in the quarter grew by 91.6% while Land Rover’s wholesale volume was up 22.9%. Profits before tax grew by 55% to $1.1 billion. For the first six months of the year it will generate $1.8 billion in profit before tax. By the end of the year Jaguar Land Rover will have made more in one year than Tata paid for it.
With very little movement in its stock in 2013 despite a very strong year from Jaguar Land Rover, I expect significant appreciation in 2014.
SodaStream: Getting Thirsty
SodaStream (SODA), the Israeli company that put the fizz back in your tap water, went public in November 2010. Since then, its stock has been on a major roller-coaster ride, twice piercing $70 only to fall back to earth closer to its $20 IPO price.
Not surprisingly, both of those surges were in July when more people are looking for refreshment. Since the two previous surges occurred in 2011 and 2013, a technical analyst might be inclined to wait until the spring or summer of 2015 to buy some shares. I wouldn’t.
Stock Twits has some interesting comments from investors that points to better times in the future. Although the note suggesting Q4 unit sales will increase by 30% year-over-year to 730,000 units is interesting, the fact that Karen Finerman owns more than 500,000 shares is far more telling about the opportunity that currently exists with SODA.
I don’t know where it’s meant to trade, but I do know that a 25% haircut over the past three months is unwarranted. Lastly, in early December SODA announced that it appointed Scott Guthrie as its GM for North and South America. Guthrie is a top-notch consumer brands executive who can take the business where it needs to go in SODA’s most important market. I see a big-time bounce back in 2014.
Masco: Foundation for Growth
Barron’s published an article on December 5 about why Masco (MAS) is a buy with a 12-month price target of $26. At current prices, that’s about a 21% gain on your investment, yet here I am picking the manufacturer of home improvement products to pull a double in 2014.
Before you say I’m off my rocker, here’s my rationale: Masco’s remodeling business generates 55% of its revenue. Housing prices in the U.S. continue to strengthen, and that will increase spending for repair and renovation work in homes across the country.
Although its $3.4 billion in debt is troublesome, it’s important to remember that Masco’s business gets stronger as every day passes. It’s expected to generate around $1.5 billion in free cash flow over the next year, providing plenty for debt repayment. At a recent investors’ conference, Masco announced that its November sales were in the high single-digits and Q4 would be just as strong as the two previous standout quarters.
Mohawk Industries (MHK), which is a peer of Masco’s, has had a great year in 2013 up 56% year-to-date — 26 percentage points higher. In fact, MHK has seriously outperformed MAS over any period in the last decade. While I believe Mohawk is a superior company, I see Masco taking some of its thunder in 2014.
Leapfrog: Christmas Looks Mediocre
My final pick to double in 2014 comes with a bit of a caveat. Leapfrog Enterprises (LF), which sells the LeapPad family of tablets, is expecting lackluster Christmas revenue given the difficult retail environment and shortened holiday season. Analysts expect full-year diluted earnings per share of 43 cents, which is considerably less than in 2012.
In November, LF stock got dumped by more than 10% when it announced its weak Q4 guidance. There likely will be significant promotional selling of its products the closer we get to Christmas, putting pressure on its stock price.
Here’s where the caveat comes in.
I’ve always liked LeapFrog as a company because it provides excellent educational products for children. Parents appreciate that and are willing to pay handsomely for them. So, it does have a defensible market. As long as it keeps making products that garner lots of awards it should do fine. My thought is that despite its warning in November, its Q4 announcement in January could set off some more selling. If the stock were to drop a couple of dollars to $6, a double to $12 by the end of 2014 is definitely possible.
However, there’s almost no chance of a jump to $16 over the next 12 months as it hasn’t traded that high since 2004. Long-term it will probably be bought by Hasbro (HAS) or Mattel (MAT). Only in an acquisition scenario could I see a double in 2014.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.