If you’ve been riding that gravy train known as the Standard & Poor’s 500 index for the last five years, then you’re living in the land of the healthy, wealthy and high-fives: It’s risen a robust 91 percent since 2010. And the Dow Jones industrial average? Up 70 percent over the same period.
As high profile as those market indexes will always remain among investors, the stock market as a whole is loaded with newsworthy companies that make headlines — and, it is hoped, meet or beat Wall Street’s expectations.
Wondering which side of the burner the hotshots — or duds — are on? Here, we look at eight noteworthy stocks for their hot-or-not potential.
1. Southwest Airlines (ticker: LUV). Low fuel prices and a host of new international destinations in Central America have bolstered this budget airline, now the nation’s largest domestic carrier. “Southwest is set to take off nicely over the next 12 months,” says G. Mathis Conner, portfolio manager and quantitative value investor at the Conner Management Group in Houston. He believes good news in the air will translate to great news on the trading floor: “Southwest can reach $43 over the next 12 months from its present price of about $35.” Outlook: Heating up.
2. Zebra Technologies Corp. (ZBRA). You may not know Zebra by name, but you certainly know its stripes. “Zebra is the bar code company, making the vertical bars that enable companies to track each item in its supply chain,” Conner says. And now, Zebra is king of the jungle, acquiring its next-largest competitor from a Motorola Solutions (MSI) subsidiary. “It’s reaping the benefits through additional market share and efficiency gains,” says Conner, who believes that with its strong balance sheet and earnings outlook, Zebra could rise more than 40 percent over the next 12 months from its current price near $106. Outlook: Hot.
3. Microsoft Corp. (MSFT). Microsoft has endured terrible press over the last few years, much of it tied to the bungling of former CEO Steve Ballmer, who left in 2014. Likewise, its stock has been a 2015 yawner — up 1 percent since Jan. 1. Though unloved and far from highflying, Microsoft is at least promising — showing growth in its cloud software division and lately in its Surface tablet hardware line. “And, of course, Microsoft is one of the biggest brands on the planet,” says Jeff Reeves, executive editor of InvestorPlace.com. “It’s a super-stable company with more than $100 billion in the bank.” Outlook: Lukewarm
4. Groupon Inc. (GRPN). Groupon stock Groupons, anyone? Not even that deal would seem capable of lifting this company from its doldrums. “The stock is clearly out of favor,” says Katie Stockton, chief technical strategist for BTIG in New York. “Groupon has been trending steadily lower almost all year after having posted a loss of nearly 30 percent in 2014.” She adds: “The downtrend has the support of negative momentum and has barely been interrupted, except for a couple of dead-cat bounces that failed well below its 50-day moving average.” And no one wants to buy a dead cat, no matter how much Groupon discounts it. Outlook: Not.
5. Amazon.com Inc. (AMZN). Call it Amazon Prime. With a stratospheric share price above $500, Amazon has been the second-best performing stock in the S&P 500 this year, up close to 75 percent. “It is undeniably a hot stock when you consider the 9.8 percent rally the day after the company reported earnings,” Stockton says. “The positive reaction suggests Amazon still has the potential to surprise investors to the upside.” So who needs a stock ticker on their Kindle to track this kind of performance? Outlook: Hot.
6. Sinclair Broadcasting Group (SBGI). What does a presidential campaign have to do with a telecommunications giant? Political ads, my friend, political ads. Plug your ears to all the sniping, but keep an eye on Sinclair’s pricing, says J. Derek Schmidly, investment strategist at Auxan Capital Advisors in Springfield, Missouri, and a portfolio manager on Covestor. “A good percentage of their stations are in swing states, and the stock is already trading pretty cheap,” he says. In fact, it’s down 13 percent to about $28. But wait until all the votes are counted, Schmidly says. “In the months following the last election cycle, this stock shot up from the $8 to $10 range to more than $30 per share.” Outlook: Hot.
7. Wyndham Worldwide Corp. (WYN). It’s a potential timeshare Tilt-a-Whirl, as Wyndham (a 2006 spinoff from Cendant Corp.) could be spinning off its vacation ownership timeshare business, says Jim Osman, CEO of The Edge Consulting Group. He cites Marriott International (MAR) and its 2011 spinoff of Marriott Vacations Worldwide (VAC), which benefited both companies handsomely. Wyndham’s move, if it occurs, could take some time, “but it presents an interesting long-term story. CEO Stephen P. Holmes has an ideology of creating value for shareholders, which strengthens our thesis of a potential spinoff,” Osman says. Outlook: Slow burn.
8. Unilever (UN). Can the British-Dutch conglomerate that bought the feisty, lefty Ben & Jerry’s — and somehow made it work — deliver a culinary double scoop? The company just created a stand-alone Unilever Baking, Cooking and Spreading, which went live in July. And that could signal a lucrative sale plan; the unit was formerly known as Spreads, but it’s believed Unilever was unable to get a desired asking price. So with a new name may come a new plan: “We believe that the hidden intention behind this separation might be to provide more clarity and transparency in the Spreads business, so that it can command the right price,” Osman says. And if it works, watch the profits spread. Outlook: Simmering.
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