The third quarter of 2015 will not go down in history as one of Wall Street’s finest moments. All three major U.S. benchmarks, the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average, fell between 6% and 8%.
While Q2 saw investors obsess over the prospects of a Greek default, Q3 saw the sudden shift of attention to China and the Federal Reserve. The former suffered a stock market collapse, as a rapid deceleration in growth spooked markets across the globe. The latter, well, we’re still waiting on interest rates to rise, and frankly we’re getting a little antsy about it.
In a nutshell, Q3 was an extremely tough one for investors, and the experts’ picks in the Best Stocks for 2015 competition felt their fair share of the pain, too.
With that said, six of the 10 stocks in the competition were still beating the S&P through Oct. 1, even if some of those market-beating returns were actually in the red.
Without further ado, here are the 10 best stocks to buy for 2015, listed in order of performance from worst to best. There’s still a quarter left to go, and the competition is very much up in the air!
Best Stocks for 2015 (#10): Yahoo! (YHOO)
YTD Performance: -40%
Investor: Greg Harmon
When Greg Harmon picked Yahoo! (YHOO) as his nominee for our Best Stocks for 2015 contest, his core thesis was that the stock looked primed for a technical breakout. Not only that, but Yahoo’s valuation was flirting with levels that implied without Alibaba (BABA), YHOO was worth very little, or even less than nothing.
That’s a pretty compelling thesis. Unfortunately, the technicals turned sour, the Chinese stock market crashed and new tax complications in Yahoo’s proposed Alibaba disposition slammed YHOO stock.
As Harmon recently noted, one-year stock-picking competitions don’t allow contestants to adjust for fluid developments like these, and he was able to stop out of the position and cut his losses in his own real-money portfolio.
That said, barring a miraculous fourth-quarter comeback, YHOO faces long odds of winning this year’s Best Stocks competition.
Best Stocks for 2015 (#9): Noble Corp (NE)
YTD Performance: -28%
Investor: John Jagerson and Wade Hansen
Noble Corp (NE) also took a turn for the worse this year, as one of the toughest energy markets in years hit just about every company in oil drilling and exploration. Noble was no exception, and it’s still not getting any help from crude oil prices, which hover around $45 a barrel.
Jagerson and Hansen acknowledge that the supply-demand equilibrium is unlikely to significantly change by early 2016, and NE stock may actually continue to underperform for the remainder of the year:
“…barring an unexpected spike in oil prices that can absorb the current overproduction in offshore operations, we believe NE stock will remain within its descending channel. This may be an opportunity for a bearish trade. However, we would suggest that shorts concentrate on NE’s peers who are less fundamentally sound and more leveraged than NE.”
At the end of the day, the bold contrarian pick was simply early. With the global supply glut still ongoing, only a sudden shift in the supply and demand dynamics could reverse Noble’s 2015 fortunes.
Best Stocks for 2015 (#8): iShares U.S. Oil Equipment & Services ETF (IEZ)
YTD Performance: -25%
Investor: David and Michael Fabian
Alas, we come to another Best Stocks for 2015 pick that’s been torched by slumping energy prices. After oil prices got hammered in 2014, David and Michael Fabian of FMD Capital Management took the optimistic view and reasoned that many names in the oil services industry were oversold.
iShares U.S. Oil Equipment & Services ETF (IEZ) could’ve easily been one of the best stocks to buy for 2015 if that thesis played out; but instead OPEC kept pumping, the Chinese economy dragged on demand and an ever-strengthening dollar offered no recourse.
With industry leaders Schlumberger (SLB), Halliburton (HAL) and Baker Hughes (BHI) accounting for 40% of IEZ’s holdings, this exchange-traded fund will be in a fine position to rebound when prices recover. But with only three months to go, don’t cross your fingers and pray for a rebound in 2015.
Best Stocks for 2015 (#7): Old Dominion Freight Line (ODFL)
YTD Performance: -21%
Investor: Mike Turner
Old Dominion Freight Line (ODFL) is a less-than-truckload regional and inter-regional trucking company, which was chosen by Mike Turner at the tail end of 2014 because of its attractive fundamental and technical outlook.
All things considered, lower energy prices should hypothetically be a boon to ODFL stock, especially during a strengthening U.S. economy. Turner guided for both of these in 2015 when he named ODFL one of the best stocks to buy for 2015.
And he was right: Oil prices didn’t just remain stagnant, they fell to $45 a barrel. The U.S. gross domestic product advanced at a robust 3.9% clip in the second quarter. And yet ODFL stock continues to struggle. What gives?
Well, although the number of shipments grew between 11% and 13% in recent months, the weight per shipment is down about 5% year-over-year. And falling oil costs led ODFL to lower its fuel surcharges to customers, which has also hit results.
Best Stocks for 2015 (#6): ABM Industries (ABM)
YTD Performance: -4%
Investor: Hilary Kramer
ABM Industries (ABM) is a pretty stable business: It provides industrial services like janitorial, parking and security solutions to commercial, government and residential buildings.
The stock pays a decent 2.3% dividend, and just a few months ago was up as much as 18% in 2015. But, like nearly every stock on Wall Street, Hillary Kramer’s Best Stocks for 2015 nominee tumbled in recent months during the market selloff.
Part of that was due to disappointing ABM earnings, which were hit by higher-than-expected workmen’s comp charges. But part of the dip was also due to indiscriminate systemic selling, and Kramer still believes the stock’s a winner.
Despite its nearly 6% losses, ABM is still outperforming the S&P 500 this year — something it has remarkably managed to do since a few days into the New Year.
Best Stocks for 2015 (#5): Prospect Capital (PSEC)
YTD Performance: -3%
Investor: Charles Sizemore
Prospect Capital (PSEC) is a rather obscure pick from Charles Sizemore, but coming from a multi-time winner of the Best Stocks competition, you can be assured there’s a method to the madness.
PSEC is a business development company that invests in turnarounds, liens, mezzanine debt, buyouts and real estate. A pretty far-reaching scope to be sure.
Without factoring in dividends, PSEC stock is down 11% on the year, much worse than the S&P’s 6% losses. But once you factor in that juicy dividend (it sits above 13% currently), PSEC is down just 3% on the year.
On top of that, it trades at about 70% of book value, a good enough deal for insiders to snap up a few million dollars’ worth of shares and for management to engage in a number of share buybacks. Although it’s currently in fifth place, PSEC’s still firmly in the running this year.
Best Stocks for 2015 (#4): Apple (AAPL)
YTD Performance: 1%
Investor: Louis Navellier
You’re probably pretty familiar with Apple (AAPL). It’s literally been one of the best stocks to buy for about a decade now, and with oodles of cash, a dividend that will likely continue to increase, stock buybacks and, most importantly, a rabid fanbase, AAPL stock was a fine bet in 2015 as well.
It’s only up 1% to date, which isn’t the sort of stellar outperformance shareholders are used to, but it’s still beating the market by a handy 7 percentage points.
So why isn’t Apple demolishing the market like it usually does? For one, some investors felt the iPhone 6s launch didn’t reveal any major product developments. Secondly, despite breaking its own record for opening weekend iPhone sales, Wall Street was underwhelmed with the 13 million units moved upon its debut.
Louis Navellier thinks that sort of logic is flawed, though, which is why he’s still bullish on the stock to finish out the year.
Best Stocks for 2015 (#3): Ambarella (AMBA)
YTD Performance: +15%
Investor: Jon Markman
High-definition chipmaker Ambarella (AMBA) has had a remarkable 2015, although the stock may be giving investors some grey hairs in the process.
The chipmaker, known for being the supplier to GoPro (GPRO), is also in several other high-growth markets, such as IP security cameras, drones and automotive video cameras.
Ambarella’s exposure to these buzzy industries sent AMBA soaring; and by mid-year, the stock had soared nearly 150%, topping out near $130 per share.
Alas, expectations flew too close to the sun, and when AMBA noted that its current quarter’s numbers might not be absolutely mind-blowing, investors got spooked.
At a forward price-to-earnings of just 16 and revenue still expected to grow by nearly 50% this year, this stock could easily make a comeback and win the Best Stocks for 2015 competition by a landslide.
Best Stocks for 2015 (#2): Google (GOOG)
YTD Performance: +16%
Investor: Paul R. La Monica
Google (GOOG) was actually somewhat of a bold pick by Paul R. La Monica. After all, the search engine giant had just come off an entirely unflattering 2014 (shares lost 5%), and there were no major catalysts on the horizon.
In fact, there were more gripes about Google’s cost controls and lack of focus than anything, so picking GOOG as one of the best stocks to buy for 2015 took some guts.
Well, La Monica was amply rewarded when the market applauded Google’s hire of Ruth Porat, former Morgan Stanley CFO, as Chief Financial Officer. The idea was that she would bring some degree of fiscal discipline and transparency to the spend-happy tech giant.
It didn’t take long for her to make her impact, and in the third quarter, GOOG stock soared 18% after the company announced a surprising reorganization of its business. Google will morph into a holding company called Alphabet, which will hold Google separately from its other businesses like Nest and Google Fiber, which aren’t directly associated with search.
Best Stocks for 2015 (#1): Rave Restaurant Group (RAVE)
YTD Performance: +17%
Investor: Rick Rouse
Rick Rouse looked where Wall Street wasn’t looking for his Best Stocks for 2015 pick, and was handsomely rewarded. By the end of January, the stock was up a remarkable 82%, as the company rebranded itself Rave Restaurant Group (RAVE) from its former moniker, Pizza Inn.
Rouse explains why the market should be so optimistic about Rave Restaurant Group:
“The company owns 24 Pie Five restaurants and two Pizza Inn units. It has franchised an additional 30 units that are already opened for a total of 54 Pie Five stores now operating. There are 177 domestic franchised Pizza Inn restaurants, bringing the total number of stores under Rave’s umbrella to 233.”
Those are just store counts, of course. What’s really interesting is what the company expects future store counts to be: Rave sees more than 500 Pie Five locations in the next five years, representing store growth of about 900% for that brand. If same-store sales continue to grow over that time, well, it’s not far-fetched to say RAVE could be one of the best stocks to buy for years to come.
As of this writing, John Divine was long shares of AAPL stock and AMBA stock. You can follow him on Twitter at @divinebizkid or email him at email@example.com.
More From InvestorPlace
- 3 Best Mutual Funds of Q3
- 10 Dividend Stocks to Load Up on for the Rest of 2015
- The 10 Best Stocks in the S&P 500 Through Q3