6 Stocks to Buy That Could DOUBLE in 2016

These six stocks have mostly struggled in 2015, but they're in prime position to bounce back next year

2015 will be remembered as a volatile year. With just a few weeks to go, the S&P 500 is down 3% — but that hasn’t come by anything resembling a straight line.

6 Stocks to Buy That Could Double in 2016
Source: https://investorplace.com/hot-topics/best-of-2015-16/

All eyes have been on China and the Federal Reserve — and that’s unlikely to change going into 2016.

Translation: Stock gains in 2016 could very well be hard to come by.

But even if the market trades flat or lower in 2016, it doesn’t mean that investors looking for stocks to buy just have no hope of meaningful upside. In fact, there are several stocks that have fallen unjustly in 2015 — but thanks to huge catalysts in 2016, they’re stocks to buy with expectations that they could rip off 100% gains or more!

Today, we’ll look at six such stocks to buy that have enormous, game-changing catalysts that should spark significant gains in 2016 — perhaps even into the triple digits.

In no particular order …

Stocks to Buy for a Doubler: Michael Kors Holdings Ltd (KORS)

korsMichael Kors (KORS) has been crushed over the last couple years, down about 60% from its all-time high in early 2014 as investors punished shares for the company’s declining margins and decelerated growth.

Still, KORS continues to grow faster than most large retailers/designers in the retail sector, with 12% growth in constant currency during its last quarter. While product discounting has in fact taken place at Michael Kors, and the company has pretty much saturated the U.S., it still has a great growth opportunity abroad.

Region Revenue Year-over-year growth YOY growth excluding currency
Americas $838.2 million 5.6% N/A
European $243.4 million 2.3% 20.6%
Japan $22.4 million 36.1% 60.7%

The “year-over-year growth” chart is what investors see on KORS’s income statement, but if we exclude currency exchange, it is clear that Michael Kors is still growing very fast with a great opportunity for global expansion. That’s why KORS is too cheap at 9 times earnings, especially when a company like Coach (COH), with meager growth prospects of its own, trades at 22 times earnings.

If COH can trade at 22 times earnings, there’s no reason KORS stock can’t support a P/E of 18 with continued growth — which would mean a doubler for Michael Kors.

Stocks to Buy for a Doubler: BlackBerry Ltd (BBRY)

Stocks to Buy for a Doubler: BlackBerry Ltd (BBRY)BlackBerry (BBRY) is one of the best stocks to buy in 2016 because of its ample rebound potential.

BBRY stock has lost nearly 90% of its value over the past five years. The reason is a virtually nonexistent hardware unit along with software and services that failed to meet expectations.

All of BlackBerry’s attempts at a recovery have, to date, failed.

This brings up BBRY’s latest product, the Priv. By all accounts, it is performing quite well, becoming the first BlackBerry handset to embrace Google Play’s 1.5 million applications. BBRY’s long-lasting problem has not been hardware design, but rather a limited selection of apps — many of which are outdated, as it relates to the App Store and Google Play.

In a previous article, I explained that if BlackBerry can sell just 3 million Privs, it can effectively double its revenue and drive free cash flow several times higher.

BBRY trades at just 5.5 times free cash flow, and if the Priv is even remotely successful, then BlackBerry has room to surge by double and even triple digits.

Stocks to Buy for a Doubler: Twitter Inc (TWTR)

Stocks to Buy for a Doubler: Twitter Inc (TWTR)Twitter (TWTR) stock is off 30% during the past six months and is off 65% from its post-IPO high. Those losses are a reflection of Twitter’s inability to significantly grow monthly active users, and concerns of how large Twitter can ultimately become.

After last week, TWTR’s opportunity to grow just got much bigger.

Twitter announced that it will be showing ads to the 500 million users who are logged out (those who see tweets but do not have a Twitter account).

If TWTR can monetize these users at about half the rate of its logged-on users, then it should easily exceed analyst expectations for 2016. While Twitter isn’t exactly cheap at 8 times sales, it is certainly not expensive by social media standards.

Twitter is expected to grow revenue 41% next year to $3.1 billion. I predict that showing ads to 500 million users can have a growth effect of at least 5 percentage points. That upside itself will create positive momentum in TWTR stock.

If Twitter can earn $3.3 billion in revenue next year, then it trades at just 5 times next year’s sales. Yes, a doubling would take that figure to 10 times next year’s sales — but that’s still far lower than the 25x peak it reached back in 2014.

But naturally, those logged-off ads need to have one heck of a positive impact for all that math to matter.

Stocks to Buy for a Doubler: Yahoo! Inc. (YHOO)

Stocks to Buy for a Doubler: Yahoo! Inc. (YHOO)The uncertainty that surrounds Yahoo’s (YHOO) plan to create shareholder value from its assets has knocked shares off by more than 30% with just a couple weeks to go in 2015.

Yahoo management has been very fickle with its 384 million shares of Alibaba (BABA) stock, but as 2016 progresses, Yahoo’s plan will come clear, and turn to action.

That will drive YHOO much higher.

Yahoo’s sum of parts are worth far more than its market capitalization, $55 billion versus $31 billion. With Yahoo likely to spin one of its assets off at face value — thereby leaving its core business and other assets significantly undervalued — that value will be reflected in gains sooner or later.

Frankly, it does not matter what Yahoo spins off.

Stocks to Buy for a Doubler: Restoration Hardware Holdings Inc (RH)

Stocks to Buy for a Doubler: Restoration Hardware Holdings Inc (RH)Restoration Hardware’s (RH) 20% crash since November, and its spot at 52-week lows, is perhaps overdone. The luxury home improvement retailer is on pace for 17.5% revenue growth this year — a year that management refers to as a “bridge year.”

Over the past year, RH has been rapidly closing its Legacy stores, which average 7,000 square feet, and replacing them with 40,000-square-foot Full Line Design Gallerias that have six to eight times the product assortment. This expansion plan allows RH to carry some of its fastest-growing product categories, like Baby & Child and Lawn & Garden — two categories that lack a presence in Legacy stores.

Once the transformation is complete, RH management expects North American sales to peak at $5 billion annually with an operating margin in the mid-teens.

The full-blown effects of this transformation will be felt starting in 2016. Management has repeatedly called 2015 a “bridge year” because it is focused on new construction, but believes 2016 will bring about accelerated growth in the 20% area due to the existence of these larger stores.

With RH trading at just 4 times peak North American sales, RH could very well double next year.

Stocks to Buy for a Doubler: Skechers USA Inc (SKX)

Stocks to Buy for a Doubler: Skechers USA Inc (SKX)Prior to Skechers’ (SKX) third quarter, SKX was enjoying gains of 150% in 2015.

Following Q3 results, shares have dropped from above $50 to below $30.

What’s funny is, SKX had a great quarter — revenue rose 27% year-over-year, with international wholesale revenue jumping well more than 50%.

The best news of all is that this rapid growth is no fluke.

To find a quarter in which Skechers has not grown at least 20%, one would have to go all the way back to Q4 2013. Meanwhile, SKX is expected to grow 31% for the full year, and will maintain double-digit growth in 2016.

Consider the recent losses in SKX stock a much-needed but overdone breather as investors were quick to take their still-sizable profits.

The good news is that Skechers’ operating performance has improved faster than its stock has traded higher. Also, SKX looks attractive from a valuation standpoint, with a forward P/E of 14 looking good for a company with projected double-digit growth.

Expect Skechers to experience some healthy multiple appreciation in 2016 as it continues to produce revenue and earnings growth.

As of this writing, Brian Nichols was long BBRY, KORS and RH.

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