Wall Street Outcasts Leading the Market, and Continue to Make a Case for Their Comeback

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In the last couple years we have seen a transition occur in the market, as the momentum stocks of the past fall into deep downtrends with no signs of recovery. But in the last few months, as the market has traded volatile, these fallen stocks have crept higher, and some are looking quite attractive as the market leaders on Tuesday.

<table> <tbody> <tr> <td> <p><em>Company</em></p> </td> <td> <p><em>Ticker</em></p> </td> <td> <p><em>Tuesday’s Gain</em></p> </td> </tr> <tr> <td> <p><strong>Netflix</strong></p> </td> <td> <p><strong><span class="ticker" data-id="204654">(NASDAQ: <a href="http://caps.fool.com/Ticker/NFLX.aspx">NFLX</a>)</span></strong></p> </td> <td> <p>14.01%</p> </td> </tr> <tr> <td> <p><strong>Nokia Corporation</strong></p> </td> <td> <p><strong><span class="ticker" data-id="204739">(NYSE: <a href="http://caps.fool.com/Ticker/NOK.aspx">NOK</a>)</span></strong></p> </td> <td> <p>5.52%</p> </td> </tr> <tr> <td> <p><strong>Alcatel-Lucent</strong></p> </td> <td> <p><strong><span class="ticker" data-id="209682">(NYSE: <a href="http://caps.fool.com/Ticker/ALU.aspx">ALU</a>)</span></strong></p> </td> <td> <p>5.45%</p> </td> </tr> <tr> <td> <p><strong>Green Mountain Coffee Roasters</strong></p> </td> <td> <p><strong><span class="ticker" data-id="203760">(NASDAQ: <a href="http://caps.fool.com/Ticker/GMCR.aspx">GMCR</a>)</span></strong></p> </td> <td> <p>7.86%</p> </td> </tr> <tr> <td> <p><strong>First Solar</strong></p> </td> <td> <p><strong><span class="ticker" data-id="209670">(NASDAQ: <a href="http://caps.fool.com/Ticker/FSLR.aspx">FSLR</a>)</span></strong></p> </td> <td> <p>7.68%</p> </td> </tr> </tbody> </table>
  • The Netflix rally began after announcing a licensing deal with Disney that will give it a first-run at content, prior to the release on other media channels. This news will give Netflix an edge in a competitive streaming business, and will separate it from the pack. The stock reached highs of $300 back in 2011, but has since fallen as the fear of increased competition threatened its growth. Some believe this will re-establish Netflix as the dominant force in the streaming business, a business that now sees increased competition and no clear favorite for the future.
  • Nokia rallied following several key developments. First, there was an announcement regarding the company’s decision to sell a services arm of its business; this coming one day after the company sold its headquarters in Finland for $221.9 million. But the big news was concerning China, and the company’s Lumia 920’s potential sales. Supposedly, the company is close to reaching a deal to sell the phone through China Mobile. As a result, with China Mobile still not having an iPhone, this should result in a significant boost for Nokia, assuming Apple does not reach a deal in the immediate future.
  • Alcatel-Lucent has received a lot of contracts these days, and in the process of cutting back its less profitable businesses, it continues to grow its more profitable ventures. One such venture was announced on Tuesday, with Telefonica. The company announced a deal to upgrade its IP networks in Argentina and Czech Republic. This news pushed its shares higher on Tuesday.
  • Green Mountain Coffee Roasters did not announce anything noteworthy on Tuesday. But, perhaps the stock was still responding to the company’s incredible earnings beat last week? However, more than likely, GMCR rallied ahead of the Starbucks Investor Conference, as many expect news regarding the single serve coffee business that will favor GMCR.
  • Much like Green Mountain, there was no news regarding First Solar to create such large gains on Tuesday. However, the company’s stock has been in rally mode for the last six months, and investors are now feeling confident in the long-term direction of the stock.

The trend against the market for these five stocks is a continuation of what’s occurred for the better part of three months. Most investors are fully aware of the market leading loss posted by each of these stocks during the last two years, but now all appear to be seeing some level of a recovery. Take a look at the performance of these stocks over the last three months.

<table> <tbody> <tr> <td> <p>Stock</p> </td> <td> <p>Three Month Return</p> </td> </tr> <tr> <td> <p>S&P 500</p> </td> <td> <p>0.15%</p> </td> </tr> <tr> <td> <p>NFLX</p> </td> <td> <p>55%</p> </td> </tr> <tr> <td> <p>NOK</p> </td> <td> <p>22%</p> </td> </tr> <tr> <td> <p>ALU</p> </td> <td> <p>16%*</p> </td> </tr> <tr> <td> <p>GMCR</p> </td> <td> <p>70%</p> </td> </tr> <tr> <td> <p>FSLR</p> </td> <td> <p>56%</p> </td> </tr> </tbody> </table>

*One-month performance

It’s impossible to know the future trend of these stocks. I have no clue which will continue to rally and which will fall. But one thing’s for certain, each performed well on Tuesday and appears to have momentum at the moment. Some might suggest that these stocks are still undervalued. Each company has several catalysts, and much of the excessive loss was due to speculation. Therefore, perform additional due diligence, and determine if any fit into your portfolio. Because due to the recent movement, it is very possible that we look back next year and see that one, if not all, of these stocks trade considerably higher as investors buyback significantly oversold stocks, and days like Tuesday repeat itself. 

BrianNichols is long ALU, FSLR. The Motley Fool owns shares of First Solar, Green Mountain Coffee Roasters, and Netflix. Motley Fool newsletter services recommend First Solar, Green Mountain Coffee Roasters, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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