It’s been a nice run for the stock market, no matter how you look at it. The bull market overall is beginning its ninth year. There hasn’t been a correction (defined as a 10% decline) since early 2016. Both the S&P 500 and the Dow Jones Industrial Average have rallied about 6% so far in 2017 — after strong gains in the last two months of 2017.
But it hasn’t been a rally for every stock in the market.
More than a few have struggled, some due to execution errors and some due to industry concerns (see: mall retailers), while others just have been left behind. Some 375 U.S.-listed stocks are down 20% or more so far in 2017.
For some of the stocks, the losses are unsurprising, and likely not temporary. DryShips Inc. (NASDAQ:DRYS), for instance, is down over 90% amidst a dizzying series of stock offerings, and many other shipping companies are down big as well.
But in 2017’s worst-performing stocks, there are some hidden gems, turnaround plays, and simply underloved value stocks.
Here are 10 stocks to buy after rough starts to 2017 that should see better days, and soon.
Stocks to Buy Before They Join This Market Rally: Snap (SNAP)
YTD Performance: -18%
To be fair, Snap Inc (NYSE:SNAP) is still trading above its $17 IPO price. But for investors not fortunate enough to get an early entry into SNAP stock, the opening price was $24, and the stock hit $26 before retreating.
Current levels below $20 imply nearly 25% downside from those levels.
It might seem too aggressive to have Snapchat’s parent on this list. After all, sentiment toward the stock remains sharply negative. Seemingly every analyst whose firm wasn’t a part of the initial offering has questioned SNAP’s valuation. Short sellers quickly targeted the stock.
But that might set up a contrarian opportunity.
There are catalysts for SNAP stock, after all. And it’s worth remembering that Facebook Inc (NASDAQ:FB) was considered a flop not long after its IPO — itself widely considered a disaster. In August 2012, FB stock fell under $20, and the Los Angeles Times asked if Mark Zuckerberg was “in over his hoodie.” With Facebook stock at $140 less than five years later, no one’s asking that question.
It’s true that Snap might not be the next Facebook. But it doesn’t have to be to drive near-term gains. If the broad market continues to rally, SNAP will, ahem, snap out of it and join in soon.
Stocks to Buy Before They Join This Market Rally: Boot Barn (BOOT)
YTD Performance: -23%
Boot Barn Holdings Inc (NASDAQ:BOOT),another retailer hammered by the changing sentiment toward the space, simply looks too cheap right now.
Boot Barn has a solid niche in Western wear and boots. For investors worried about the threat of e-commerce toward the brick-and-mortar model, Boot Barn already has a solid — and fast-growing — online business.
BOOT shares have declined almost without interruption since late November, losing more than 40% in the process. But there has been little in the results to support that type of fall. Boot Barn still is growing both sales and profits, and the key Texas market is recovering from oil bust headwinds. Boot Barn has room for new store openings, the aforementioned online business, and room to take share in a fragmented boot and Western wear market.
Right now, BOOT stock is being tossed out with the rest of the retail industry. But that should change as Wall Street starts hunting down any stocks to buy that aren’t already wildly overbought.
Stocks to Buy Before They Join This Market Rally: Aerohive Networks (HIVE)
YTD Performance: -25%
Small-cap networking company Aerohive Networks Inc (NYSE:HIVE) has seen its stock near an all-time low in 2017, before a modest recent rally.
The networking space as a whole continues to be tough, and Aerohive admittedly has posted disappointing results in its key education vertical. Federal funds for Wi-Fi equipment in U.S. schools was supposed to be a major tailwind for sales of Aerohive access points — but the benefits haven’t quite materialized to the extent Aerohive expected.
That said, it’s not as if the news is all bad.
HIVE is coming off back-to-back years with double-digit revenue growth, including 10% in 2016. Non-GAAP net loss was halved last year. Net cash is about 20% of the company’s market capitalization, and Aerohive products still appear superior to controller-less products from rivals such as Cisco Systems, Inc. (NASDAQ:CSCO).
Aerohive has time to continue to execute its strategy — and could become an acquisition target in the meantime. Growth might have taken longer than expected, but Aerohive still is growing, and it seems likely that investors will remember that sooner than later.
Stocks to Buy Before They Join This Market Rally: Libbey (LBY)
YTD Performance: -27%
Like FMSA, Libbey Inc. (NYSE:LBY) had a rough fourth quarter report in February, with the stock declining 17% after missing analyst estimates badly. The company’s glassware products — sold to both consumers and restaurants — have struggled with demand, and a work stoppage in Ohio further pressured Q4 earnings.
But shares have stabilized since the decline, rising steadily off a four-year low hit in early March. Libbey continues to hold dominant share and drive double-digit EBITDA margins. The company’s 2017 guidance was somewhat disappointing, but even with efficiency investments, profits should be relatively flat year-over-year.
There are short-term challenges, but the long-term case still holds for a company set to celebrate its 200th anniversary next year. An improving economy should boost demand, both from household formation and increased restaurant visits (and glass breakage). A 3.3% dividend yield adds income to the bull case as well.
With LBY stock trading at less than 10x 2018 consensus EPS, Libbey should be a comeback story in 2017.
Stocks to Buy Before They Join This Market Rally: Synchronoss Technologies (SNCR)
YTD Performance: -31%
Synchronoss Technologies, Inc. (NASDAQ:SNCR) is another fallen angel in the software space. But SNCR isn’t a new, hot growth company: it has been public for over a decade and a longtime heavyweight in the enterprise mobility space.
Synchronoss solutions focus on enterprise mobility management, enabling bring-your-own-device (BYOD) policies. The company has relatively new joint ventures with Goldman Sachs Group Inc (NYSE:GS) and Verizon Communications Inc. (NYSE:VZ), and just completed a major acquisition of Intralinks Holdings. That acquisition, combined with divestitures of activation business, makes Synchronoss a cloud pure-play going forward.
Yet SNCR stock isn’t valued that way, particularly with the stock’s decline in 2017. While Q4 earnings were somewhat disappointing, they certainly weren’t enough to support a 30%-plus decline.
As the Synchronoss story plays out, SNCR stock will rebound.
Stocks to Buy Before They Join This Market Rally: Apptio (APTI)
YTD Performance: -32%
The Apptio Inc (NASDAQ:APTI) IPO in September actually went pretty well. The offering priced at $16, above an estimated range of $13-$15. Shares gained 41% on the first day of trading. Analyst initiations in October were relatively bullish, with targets all above $20.
And since then, it’s been just about straight down for APTI stock.
Truthfully, it’s not entirely clear why. Apptio’s SaaS platform is used to measure SaaS spend for companies, allowing them to better understand ROI and other investment calculations. The cloud space remains reasonably solid at the moment: high flyers like Splunk Inc (NASDAQ:SPLK) and Workday Inc (NYSE:WDAY) have gained nicely year-to-date. And Apptio beat analyst estimates in both Q3 and Q4 — though the stock sold off following Q4 earnings.
Apptio isn’t profitable, and APTI stock isn’t cheap, or low-risk. But a barely 2x revenue multiple on an enterprise basis represents a substantial discount to most SaaS stocks, and guidance for double-digit growth in 2017 suggests Apptio still has room, and time, to grow into its valuation.
At some point, the same investor and analysts who liked APTI stock at $20-plus in 2016 will like it again at $12 in 2017.
Stocks to Buy Before They Join This Market Rally: Tempur Sealy (TPX)
YTD Performance: -33%
It’s been a roller-coaster ride for Tempur Sealy International Inc (NYSE:TPX) over the past 18 months. TPX stock tanked in late 2015 and early 2016 during the last market correction. It soared off the back of Q2 earnings in July, then plunged again after warning of weaker-than-expected Q3 results.
TPX enjoyed the post-election rally before a stunning disclosure: The company was terminating its contracts with major retailer Mattress Firm. The stock declined 28%, and even with a strong fourth quarter report in February, has stayed relatively flat since.
The loss of Mattress Firm isn’t something to be ignored. But neither are the positive attributes for TPX. Both Tempur-Pedic and Sealy remain well-known, higher-end brands with committed customer bases. Increased consumer confidence and new home sales should be a driver going forward: there’s a reason TPX stock gained along with the broad market heading into the Mattress Firm disclosure.
Meanwhile, TPX stock is cheap, trading at barely 11x 2016 adjusted EPS. The company changed its corporate charter last week to make it easier for an acquisition offer, and private equity could see value in the company.
This one may take some time, but TPX stock should see improvement at some point in 2017.
Stocks to Buy Before They Join This Market Rally: Fairmount Santrol (FMSA)
YTD Performance: -40%
Weakness in crude oil prices has taken down oil and gas service stocks so far this year. Premature optimism in late 2016 hasn’t helped, either. But the 38% decline in shares of Fairmount Santrol Holdings Inc (NYSE:FMSA) stock seems overdone.
Fairmount Santrol provides “frack sand” to shale gas drillers. And while oil prices are lower, activity in U.S. shale regions in particular has accelerated over the past few months. Investors didn’t like FMSA’s Q4 earnings — shares fell almost 16% — but performance did improve sequentially, and the company highlighted further strength in the first quarter.
Meanwhile, an equity offering last year helped clean up the balance sheet.
FMSA still is a high-risk play, to be sure, and debt is higher than many investors would like. But its business is based on drilling, not just oil prices — an important distinction the market appears to be forgetting at the moment.
Stocks to Buy Before They Join This Market Rally: Horizon Global (HZN)
YTD Performance: -44%
One would think a manufacturer of trailing and towing solutions would be doing reasonably well in a market at all-time highs, and that was the case for Horizon Global Corp (NYSE:HZN) — until recently. HZN stock cruised through 2016, increasing 134%. An acquisition of fellow equipment manufacturer Westfalia was well-received, and strong results through Q3 further boosted investor optimism.
Sentiment changed as the year turned, and HZN received a double whammy around its Q4 report. The stock declined 10% on preliminary results in January; investors sold the stock off again after disappointing guidance given with the Q4 release earlier this month.
But it seems like far too big a selloff.
Horizon managed to reach a long-held target of 10% operating margin in 2016, and now has the opportunity to improve the recently acquired Westfalia operations. Despite that opportunity, the stock trades at less than 15x the midpoint of 2017 adjusted EPS guidance — the same guidance that investors apparently found so disappointing. As 2017 rolls on, and the potential for the Horizon-Westfalia tie-up becomes more clear, investor sentiment will reverse.
Stocks to Buy Before They Join This Market Rally: Sportsman’s Warehouse (SPWH)
YTD Performance: -48%
What’s particularly surprising about the decline in shares of Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is that nothing’s really happened so far in 2017 — at least nothing that should be a negative for SPWH stock.
SPWH hasn’t reported fourth-quarter earnings yet (they are due on Thursday). Gander Mountain did declare bankruptcy, perhaps a bad omen for Sportsman’s Warehouse. But the troubles there — and the closure of 32 Gander Mountain stores — would seem a modest benefit for SPWH’s online business. There are concerns about firearm sales, to be sure. But gun manufacturer stocks like American Outdoor Brands Corp (NASDAQ:AOBC) and Sturm Ruger & Company Inc (NYSE:RGR) have stabilized since the election.
Rather, it seems concern about retail more broadly has taken down SPWH stock. And it’s possible that selling of retail ETFs has added pressure.
But the decline has left SPWH simply too cheap, trading at less than 7x the low end of fiscal 2016 guidance. That’s despite the fact that EPS is supposed to increase year-over-year, by almost 10% at the midpoint of guidance. And it’s despite the fact that Sportsman’s Warehouse believes it can quadruple its current store count.
Shares began to stabilize last week, and they would seem to have possibly substantial upside from here.
As of this writing, Vince Martin was long SPWH.