Three Stocks that Doubled — And the Next Three to Follow
The Dow recently crossed the 9,000 mark on the back of a solid start to the second-quarter earnings season, while the S&P is up +10% for the year. The market couldn’t have made it to this point without a few stocks seeing substantial gains.
Here are three stocks that have posted triple-digit gains this year. After analyzing how they did it, I’ll tell you three more companies that will follow suit.
OshKosh (NYSE: OSK)
YTD Gain: +191.5%
Industrial equipment maker OshKosh faced major headwinds due to the economic downturn, and its shares sank as low as $4.95 in March. But just when things seemed to be at their worst, OSK posted strong growth, and the shares began to climb.
The catalyst was a $1.05 billion contract to build military vehicles for use in Afghanistan that protect against roadside bombs. The contract, initially for 2,000 vehicles, could lead to as many as 10,000 vehicles and $4 billion to $5 billion in revenue. The shares are now trading near $27.
How it Got There: A major catalyst thanks to Uncle Sam.
General Cable (NYSE: BGC)
YTD Gain: +136.8%
It’s strange to think a 150-year-old company that makes nothing more than a variety of specialized wires and cables could score a +136.8% gain so far this year, but that’s exactly what General Cable has done.
The company makes things like power cables, household wiring and undersea fiber-optic cables. Industrial activity was down sharply during the heart of the credit crisis, and BGC, consequently, took a major hit in 2008. Its shares traded below book value at one point, until investors finally woke up and realized the Street was vastly undervaluing the company. The shares took off and have never looked back.
How it Got There: The company’s assets were at dirt-cheap values.
Expedia Inc. (Nasdaq: EXPE)
YTD Gain: +121.6%
Online travel company Expedia has made strides to maintain its business and expand into new markets despite a tough economy. The firm is aggressively partnering with hotels across Europe and Asia to broaden its reach and propel growth.
Expedia is a strong brand that commands a dominant share of the travel market — its site, in fact, is one of the 25 most visited sites on the web. Sales and bookings fell in the first quarter, but the company still beat expectations. It also put an end to booking and cancellation fees, which will help attract and maintain customers. EXPE shares are up more than +120% so far this year.
How it Got There: The stock was beaten up, but the business wasn’t. Never underestimate the power of a strong name brand.
The Next Winners
Carnival (NYSE: CCL, $27.29)
Carnival has had everything imaginable thrown at it, and it’s still standing. An economic downturn, higher fuel prices, a global outbreak of swine flu — all were obstacles the cruise operator navigated successfully.
Carnival aggressively cut rates after a swift decline in vacation spending brought on by the slowing economy. The discounts led to an increase in bookings. Those prices marked the bottom, and going forward — into what we all hope is a stronger economy — Carnival will begin raising cruise rates.
Aside from a travel rebound, rumors abound that Washington will allow travel to Cuba. This would be a game-changer for Carnival, for whom the Caribbean is a major market. Cuba cruises would mean a huge amount of new business that would have a direct result on the company’s bottom line.
CCL shares are valued at 10 times earnings. If travel rebounds within the next year, the shares should at least return to their historical valuation of 16.4, implying a +64% upside. And if Cuba opens up, the new routes would make the shares soar even further.
How it Will Double: Washington opening up Cuba to travel could be just what CCL needs.
Valero Energy (NYSE: VLO, $17.70)
Valero is the largest crude oil refiner by capacity in the U.S. It’s also a classic value play. The shares were beaten up as crude prices fell from record highs in 2008 and now need to double to approach their 52-week high.
VLO is trading for less than 0.6 times book value, meaning that investors are willing to pay only 60 cents on the dollar for the company’s assets — and nothing for its business. This is unusual for a market leader like Valero, and its share price will undoubtedly rise when the market foresees the world economy lifting out of its slump and headed for recovery.
How it Will Double: A classic value rebound brought on by an economic recovery.
Regions Financial (NYSE: RF, $3.89)
Before you balk at the mention of a bank stock, remember that just about every bank has been beaten down during the financial crisis. Regions was no exception. But the bank has been cleaning up its balance sheet by reducing its exposure to problem loans and weaning itself from dependence on Uncle Sam.
The bank expects to have reduced the amount of government-guaranteed debt on its balance sheet to $4 billion by the end of the month. It has also benefited from the struggles of competitors like CIT Group (NYSE: CIT) by gaining small-business loans.
Regions chief Dowd Ritter recently said that the bank doesn’t need more capital and it will repay its TARP funds to the government by the end of the year.
Regions shares are down -80% from their 52-week high. They should recover that lost ground and then some over the long term.
How it Will Double: Regions will pay back its TARP money with a healthier business — and share price.