Three Stocks with Q4 Losses Will Trade Higher

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

Stocks in the coal and solar industry have bounced off their bottom lows to trade considerably higher with other fallen stocks such as Nokia during the last six months. Now, there is a new group of fallen stocks, but with the market’s history of reversing trends in January, I believe that several of this group will trade higher in the near future. And in this article, I am looking at a few of these stocks.

Mellanox (NASDAQ: MLNX) was among the year’s top performers up until September, being driven higher by incredible quarterly performance and strong demand for its InfiniBand. However, following a series of downgrades, news of insider selling, competition from Oracle, and a quarterly report that was just shy of analyst’s expectations, Mellanox has lost almost 50% of its value in just a few months time.

At one point Mellanox had all the traits of a momentum stock, but now it has become a value investment. The company continues to grow by more than 100% year-over-year but is now trading with a forward P/E ratio of under 15.0! In my opinion, there is no way to logically explain its fall. Of course there is going to be some competition, but Mellanox investors are preparing for a worst case doomsday scenario. With that being said, the fundamental growth is obvious, and typically it only takes one day of gains to reverse a trend. Therefore, I was enlightened to see it trade higher by nearly 5% (when the market was trading lower) on Friday, and I would now watch for a longer trend higher.

Despite Amarin Corporation (NASDAQ: AMRN) earning an FDA approval for Vascepa; the company has faced headwind after headwind regarding the marketing approaching and the flexibility with its newly approved drug. The company was at one time valued at more than $2 billion, despite never selling a product. Investors had priced the stock high because of the product’s potential to return billions in annual sales; and that a potential buyout could be in store.

Back at the start of the month Amarin announced that it was raising funds and that it would begin to hire a sales force. This news has created a continuous trend lower as the belief that no buyout would occur spooked investors. However, with the stock being priced at just under $8.00 it is very possible that the company might begin to see an increased level of interest among large pharma. Maybe the $2 billion market cap and the requested premium was just a little too much. But with the company having a potentially multi-billion dollar product, and a more attractive valuation, I would watch it closely, and anticipate gains in the months that lie ahead as the company prepares for a massive launch.

Apple (NASDAQ: AAPL) has lost over $170 billion of market cap from its 52-week high, yet when you really look at the fundamentals of Apple, nothing has changed to create such loss. The company continues to sell iPhones, iPads, and its other products as quickly as it can manufacture them. It continues to post strong year-over-year growth and provide a solid forecast. Yet because the company originally had a supply problem panic was created and the domino effect of strong selling took place. Just think of where the stock might be trading if Apple had an unlimited supply of iPhones during the first week, or at least enough to meet to initial demand.

Regardless of initial supply problems, Apple is still going to sell, and has sold, tens of millions of iPhones, and is expected to post growth of nearly 30% over the next year. The stock is now trading with a forward P/E ratio of just 9.06, and in my opinion, there is no person who can make a logical case for why Apple is too expensive based on current fundamentals and expected growth. With that being said, Apple has been the largest holding of nearly every fund, and because of its loss, there is no denying that these funds have cut back or sold their position during its sell off.

The fact of the matter is that funds need to look good to investors, especially on end of year reports, and holding Apple right now might not be good for business. However, once the new-year begins, and funds start to rebalance, I say watch out for Apple, the most undervalued large cap stock. I suspect that the stock will rise as investors take a step back and identify its value.

Each of these three stocks has great fundamental outlooks for the next year, but has fallen lower in Q4 of this year. Each has a promising year ahead, and I believe will trade considerably higher. Therefore, I suggest your own due diligence, and if it fits into your portfolio, you might want to add one If now all three to your holdings.


BrianNichols owns shares of Apple, Amarin, and Mellanox. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. 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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