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Top ten turnarounds of 2012

This article focuses on the top 10 stocks that were classified as “Under Performers” in 2011 but have made a comeback in 2012 and grabbed the attention of investors presenting potential for gain. It includes analysis of stocks from varied sectors ranging from Technology and Real estate to Retail. A detailed analysis of each company and their turnaround strategies is also laid down for your reading. The article will also highlight leads for potential future investment in 2013.

  1. AMGEN ((NASDAQ:AMGN): Amgen, established in 1980 as a leader in biotechnology and has been involved ever since, in the development, manufacture, and distribution of human therapeutics. Its innovative leads in the manufacture of Drugs have facilitated people in their fighting against serious illnesses. The Company’s stock was selling at $56.97 at the beginning of 2011 and gradually increased to $63.47 by the year end. 2012 saw a big change in the prices of the company’s stock from $64.21 to the current price of $87.40. Have a look at the tabular depiction of prices at the beginning and close of fiscal years 2011 and 2012, below:
Period Price$ Volume %Change in price
Jan 2011 56.55    3,561,395 8%
Dec 2011 61.16    6,747,052
Jan 2012 69.1    6,839,058 22%
Dec 2012 88.41    2,876,494

 

 

The table signifies an increase of 22% in the share price during 2012 which is attributed to the following reasons;

  • Amgen bought Micromet for $1.6 Billion. The synergies between the two companies helped spur major research and development advances in cancer drugs regime.
  • The fundamentals of the company have strengthened and it has posted strong results quarter on quarter. Their revenue stood at $3.97 Billion as against $3.84 Billion YOY.
  • KAI Pharma a private pharmaceutical company was also acquired for $315 Million. The company is conducting research for finding cures to hyperparathyroidism and renal impairments entailing it.
  • Talks are underway for a $415 Million deal to takeover Decode. This buyout will help Amgen to reach new heights as Decode is undertaking research in the field of Gene Therapy i.e. to cure the disease through genetic intervention.
  • The company’s  dividend payout has improved and it has also allocated $2 billion for share buybacks.

The company’s rigorous expansion through acquisitions and the resulting growth in its cash flow stream signifies that the base of the company is strong. It has invested in the research and development for production of quality drugs for the masses and has also ensured a healthy distribution of the same. The stock is clearly a buy for the future.

  1. AMAZON ((NASDAQ:AMZN): Amazon, the world’s largest online retailer has given a good performance in 2012 in terms of its share prices. It has forayed into software development services and has also built many service centers across the globe.

The share price as of December 2011 was $173.1 and the first quarter saw an increase of up to $194 which went to $230 in May and $260 in August 2012 the level where it currently resides.

The current volume of trade stands at 986,435 as against 5101,861 on January 2012. Illustrated the details in the table below

Period Price $ Volume % Change in Price
Jan 2012 178.56    5,055,642 31%
Dec 2012 258.62       986,435
Jan 2011 185.86    3,166,150 -5%
Dec 2011 177.28    3,495,273

The reasons cited for the massive uptrend are;

  • Sales Strategy: the multi-level sales strategy adopted by the company distinguishes it from its competitors. It maintained a business to customer to its employees and business to business strategy with its suppliers. Moreover, its fixed price strategy made it lucrative for the small scale  sellers.
  • the company’s history is filled with a series of acquisitions during the last decade; the most recent being the  takeover of Kiva Systems which uses two robots for distribution and order taking and purchase of Teachstreet.com, an online portal which provides information to students about their teachers, their training skills and their background.
  • It has also recently announced the opening of fulfillment center that will create multiple job opportunities.

Despite the stiff competition in the space from Apple (NASDAQ:AAPL) and Netflix (NASDAQ:NLFX) Amazon continues to top the list as it has surplus cash reserves for new additions and offers under its umbrella. It is felt that having Amazon in the portfolio will provide good returns even in the rainy days to come.

Comcast Corporation (NASDAQ:CMCSA):Comcast Corporation derives name from commercial broadcasting. It has about 22 million video subscribers and caters internet and cable services to 39 states in the United States and District of Columbia. The share prices of the company in the past year reports

It is evident that 2012 has seen significant movement of stock price from $23 to $37.36 an increase of almost 33%. The fundamentals of the company are very strong. An Exhibit to show the financials of the company:

 

Consolidated Results 2011 2012 Growth
Revenue $40,800 $46,633 14.30%
Operating Cash Flow (OCF)1 $13,441 $14,700 9.40%
Operating Income $7,803 $8,885 13.90%
Earnings per Share2 $1.03 $1.72 67.00%
Free Cash Flow3 $5,133 $6,107 19.00%

 

There has been a progressive growth for the company from 2011 and there is an increase in revenue of 14.3%. The reasons attributed to this growth are:

  • Comcast Corp (Nasdaq:CMCSA) has took over NBC Universal in Jan 2011. This deal has enabled Comcast to get stable position in the $30 Billion Media world.
  • There has been an increase in the dividend paid by the  company and stood at $0.115 per share as on Q3,2011
  • NBC’s news channel called MSNBC in which Microsoft held 50% shares is bought by Comcast in mid 2012 for $300 Million. The channel was named NBC News. This enabled the company to start online broadcasting of news, in the growing internet world.
  • NBC universal in which Comcast holds 51% entered into agreement with Verizon FiOS TV services and assured people that it would extend NBC universal live services and on demand channels both in and out of home. This agreement is a win -win situation for both the companies as it would enhance the customer base of both.
  • The most recent development of the company is that it got a nod from Russian government for construction of theme park in Moscow, the biggest investment of the company outside US, and is expected to be operational by 2018 with an estimated expense of $2.8 billion.

With all these diverse strategies and investment from the company it looks like it will be a hit in 2013 as well.

  1. Discovery Communications Inc. (NASDAQ:DISCA): Discovery communications another media company has done well in the current year. The company operates three segments viz. US Networks providing cable and internet services; International Network which provide satellite channels and communication services and Education networks where it facilitates students through subject specific products offerings. The company also supplies post production audio services. The performance of the company in terms of its share prices is shown below:
Period Price Volume % Change in Price
Jan 2012 42.711 1,388,467 32%
Dec 2012 63.21 388,166
Jan 2011 38.571 1,268,793 6%
Dec 2011 41.08 1,393,295

 

There has been a 32% increase in the share price and the financials of the company have come out relatively strong.

 

Consolidated Results 2011 2012 Growth
Revenue ($M) 1017 1031 1.30%
Operating Income 438 428 2.33%
Earnings per Share2 0.57 0.6  0.05%

 

The increase in stock prices over the last year’s quote is accompanied by a marginal increase in revenues; affecting operating income by more than double the change in sales which depicts expenses of the company have  been vigilantly checked.

  • DISCA is one of the few companies that saw an increase in share prices after the Lehman Bankruptcy. The stock was up more than 100% during that period. This boosted people’s confidence and induced them to buy more.
  • The company is not only accredited as the biggest media company but is also diversified into many other areas. It holds the largest theme park (both in terms of size and number) across the globe and is a well known tourist attraction.
  • The company has recently announced the buyout of SBS Nordic operations for an estimated value of $1.7 billion. The company operates 12 networks covering most of European zone.

The strategies and diversified exposure make the company a must buy. Strongly recommended as part of an individual’s portfolio for better returns.

  1. EBay Inc (NASDAQ:EBAY): The well known e-commerce company is involved in the sale of merchandise across the globe. It facilitates the users to buy and sell goods in a single platform and also enables user payment services. It also facilitates people to provide solutions for E-commerce. As of the end of 2011, EBay has 100 million active users of its account. The following table shows comparative share price of the company.

 

Period Price $ Volume %Change in Price
Jan 2012 31.52 9,386,642 37%
Dec 2012 50.24 7,261,305
Jan 2011 28.26 11,370,810 9%
Dec 2011 30.92 3,403,706

And the financials of the company is

Consolidated Results 2011 2012 Growth
Revenue ($M) 2965 3404 87%
Operating Income 536 667 80%
Earnings per Share2 0.45 0.34 76%

The company had a series of acquisitions during the year. Some of them are

  • It acquired Brands4friends in early 2011. This company is headquartered in Germany and deals in online shopping of apparels.
  • It had introduced the mobile application for access to its portal which enables users to buy products through their mobile phones.
  • In mid 2011, it acquired companies like Magento, GSI Commerce Inc  and it also got Korean Government approval for merging its online portal with itself.
  • Tata Motors of India decided to sell their Nano cars through the EBay website which attracted people from across the globe
  • The rise of the “iPhone” Fad boosted the sales of Ebay  which gave a push to its stock prices.
  1. Expedia Inc(NASDAQ:EXPE):the company is involved in the business of catering services. It has established its wings in many European countries as well. It plans a travel tours for individual, books tickets, making reservations in hotel. In short it is an end to end travel partner. In this growing world tourism is one of the few sectors that has seen rapid growth with people spending more money on travel. The share price of the company in 2012 as compared to 2011 is depicted in the table.
Period Price $ Volume % Change in Price
Jan 2012 28.87          2,919,545 52%
Dec 2012 59.59              458,301
Jan 2011 23.9316          7,941,663 14%
Dec 2011 27.979          3,729,595

 

 

 

There has been an increase of 52% in the current year. The financials of the company look like

Consolidated Results 2011 2012 Growth
Revenue ($M) 1020 1199 85%
Operating Income  

209

 

227

 

92%

Earnings per Share2 1.22 1.20

The recent developments in the company are as follows

  • US airways group and West Jet airlines Ltd. Has signed agreement with Expedia to facilitate the latter to make flight bookings with their airlines with Global Distribution System. This will result in loyal customers benefitting by offers provided by the company.
  • In mid-2011, the company announced that it will split itself into two companies. One will function under the name Expedia and the other will function as Trip Advisor. This will help amassing wealth and the proceeds of the two companies can be invested in better acquisitions.
  • It has bought a company called VIA Travel in the mid of 2012. There has been a series of partnerships and alliances with leading hotels and resorts during the previous year which helped them improve sales and increase cash reserves.

Furthermore this company has many deals in the pipeline and the share prices are said to increase in the forthcoming year as well.

  1. Gilead Sciences, Inc. (NASDAQ:GILD):GILD is a pharmaceutical company and is involved in the research and manufacture of drugs for complex diseases like Human immunodeficiency virus (HIV), Hepatitis B & C and cardiovascular abnormalities. Headquartered in California (USA) the company has operations in North America, Europe and Asia Pacific. The share prices of the company in the previous year  look interesting as shown in the table below
Period Price $ Volume % Change in Price
Jan 2012 44.25    15,054,910 39%
Dec 2012 72.48      1,963,569
Jan 2011 38.7      8,981,888 1%
Dec 2011 39.01      7,472,028

 

 

 

 

2012 saw an increase in share price of 39% and the volume of transaction has also increased manifolds. The financials of the company is exhibited in the table below.

Consolidated Results 2011 2012 Growth
Revenue ($M) 2122 2426 87%
Operating Income 1004 1044 96%
Earnings per Share2 0.96 0.91

Recent developments that contributed for the increase in share prices of the company is as follows;

  • Calistoga pharmaceutical was bought by GILD in early 2011 for a cash deal of $375Million. This helped the company to move further in the research of drugs for complex diseases as the former was an established firm in the segment.
  • The company has signed an agreement with Global Immune. By this deal the company will develop vaccine for chronic hepatitis B. GILD’s strategy of building new agreements will help the company to take a lead in the pharmaceutical industry.
  • The US food and drug administration department has approved the drug manufactured by Gilead for the cure of HIV. This would provide the company to commercialize the medicine in the open market to public.

Going by the fundamentals and the developments underlying the company this will hit the share market in coming times.

  1. News Corp (NASDAQ:NWSA): News Corporation a wholly diversified media company emerged as yet another turnaround stock in the current year. The company is involved in diverse programs including satellite channels, production and distribution of action and motion pictures. Generally the media stocks are highly volatile and are subject to rise as it depends mainly on the people’s sentiment. Below is movement of stock during the year
Period Price $ Volume % Change in Price
Jan 2012 18.35    10,658,950 27%
Dec 2012. 25.15      4,176,894
Jan 2011 14.36    16,788,900 18%
Dec 2011 17.615      6,001,468

 

 

 

FINANCIALS

Consolidated Results 2011 2012 Growth
Revenue ($M) 7959 8136 97%
Operating Income 1063 2555 42%
Earnings per Share2 0.31 1.03 30%

Recent Developments of the company are listed as

  • The company under the STAR brand introduced 4 new channels in COMCAST broadcasting in parts of the USA.
  • In mid 2011, the company allocated $5 Billion for repurchase of stocks which signifies the company has sufficient cash outflow.
  • During June 2012, the company has bought stakes in ESPN and Walt Disney’s Asian sports broadcasting channel. This gave way for the company to monopolize the  area of sports telecast.
  • The company aims to grow its media business, its publishing arm is still faced with serious losses to the tune of $2.1 billion and it is on the look for a quick fix at the earliest.
  1. Tripadvisor Inc(NASDAQ:TRIP) Trip advisor once a part of Expedia Inc, mentioned in the same document under” Expedia” was spun off from the parent company later in 2011. The company is now running on a stand-alone basis and is operating websites which caters holiday planning need of people in nearly 30 countries across the globe.
Period Price $ Volume % Change in Price
Jan 2012 27.75          4,177,497 35%
Dec 2012 42.97          2,640,047
Dec 2011 14.36        16,788,900  

 

 

The numbers above are for the period starting Dec 2011 as the spin off has taken only during that time period. The total revenue of the company stood at $ 212.7 Million as of the third quarter of 2012 as against $180.8 Million during the same period in 2011.

The company has already gained public attention and credit worthiness as it has been well established by its parent company. It acquired Wander fly recently in October 2012. The company is expected to make new announcements in the future make it a potential buy.

  1. Urban Outfitters, Inc. (NASDAQ:URBN): Urban outfitters as the name goes deals with retail garment sale and sells under its own name. It also has online sites dedicated to its merchandise. Its major merchandise include apparel, footwear and other accessories. The movement in stock prices was weird as it went up in the beginning of the year 2011 and slid down during the year shedding off almost 32% and again 2012 seemed positive. Here is a brief  glimpse of the price moves in tabular form:
Period Price $ Volume % Change in Price
Jan 2012 24.81          3,546,159 37%
Dec 2012 39.3              555,419
Jan 2011 35.75          5,040,286 -32%
Dec 2011 27.11          4,019,352

Nevertheless, the Financials of the company looked stronger; its revenue was at $692Million as against $610 Million during the same quarter last year. Operating income was at $93Million for the fourth quarter in 2012 as against $73.3 Million during the same quarter in 2011.

Some headlines that took the company to the limelight were:

  • Customer spending towards apparels fell during the year as the average consumer is more aware of the importance of savings.
  • Hurricane Irene in 2011 and Sandy in 2012 decreased the online sales drastically.
  • Urban Outfitters’ CEO Glen Senk quit early 2012, because of which the company’s shares fell more than 20%.
  • The company entered into a distribution agreement with World Co. Ltd which is headquartered in Japan, for marketing their goods.
  • Sales looked dull in the current year festive season which also led to the decrease in the company’s stock price.

From the above analysis of top 10 stocks it is observed that Pharma and Media sectors have done well in the present year with diversifications, acquisitions and expansion strategies. If the company continues in the same phase, people invested in these companies/sectors can gain in 2013 as well. Nevertheless it depends on the market sentiments and the new policies for tax and spend cuts to be introduced by the Federal Government in early 2013.

Published by Flavia Carruth

Hi, I am Flavia and have done my MBA with finance as specialization and a Bachelor in Economics with 4 years of experience as Financial Analyst in leading Software Firm. I have passion for article writing, report making and stock market Analysis.



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