12/12/2012 7:15 PM ET|
Naughty or nice? 7 stocks of 2012
Here’s a look at companies that were particularly nice to investors this year (think Michael Kors) or particularly naughty (ahem, Facebook).
The holiday season is approaching fast, meaning Santa Claus is busy making his list and checking it twice. In the spirit of the season, The Fiscal Times offers Santa its help by rating a short list of well-known companies based on their 2012 market performance. In some cases, they have earned stockings stuffed with chocolate, juicy mandarin oranges, silver dollars and other goodies; in other cases, the companies deserve nothing but lumps of coal.
Before we get to the list below, note that some big-name companies were neither naughty nor nice -- or perhaps they were both. For instance, in many respects Apple (AAPL) has had an excellent year, rolling out new versions of its iPhone and iPad and introducing a new, smaller iPad, as well as fighting off Samsung Electronic's (SSNLF) threat to its patents. But Google's (GOOG) Android operating system continues to nibble away at Apple's dominance, and investors have driven the latter's share price down so much recently that Apple can't qualify for any of our rewards this Christmas.
But there are plenty of other companies whose managers have made particularly intelligent or foolish decisions over the course of 2012 and that deserve to be recognized -- or shamed. Each of these seven companies should be at or near the top of one of Santa’s lists:
Naughty: Facebook (FB)
Perhaps the most obvious candidate for a lump of coal is the social networking company whose IPO was bungled so badly. True, the immediate fault can be traced to the deal's underwriters and to an exchange that was ill-prepared for the frenzied attempts on the part of investors to transact trades, but the company played a role, too. Had it not acceded to an IPO price that clearly was very richly priced, with no room for error, a stumble wouldn't have had such a negative impact on the share price and the news of a disappointing initial earnings release wouldn't have been as devastating. Even after a strong bounce in recent weeks, the stock remains 26% below the IPO price.
Nice: Michael Kors (KORS)
Other high-end retailers have shown signs of faltering revenues or sales levels, but not Michael Kors, which went public almost exactly one year ago. It has rolled out new boutiques within larger department stores and has benefitted from increased recognition of the brand name. Revenue was up 74% as of the end of its fiscal second quarter in late September, while earnings doubled. In contrast with Facebook, here is an IPO that has under-promised and over-delivered. Shares are up 87% this year.
Naughty: J.C. Penney (JCP)
The idea of "store in store" boutiques may be working for Michael Kors, but as a part of the overhaul plan by J.C. Penney's new management team, they appear to be a dismal failure. Shoppers are staying away in droves, disaffected by the lack of bargains. The company has even had to suspend its dividend to preserve cash. The stock has lost 45% in 2012. That earns the beleaguered retailer a few lumps of coal right there.
Nice: The Gap (GPS)
A year ago, Gap was a drag on the retailing industry; this year, thanks to being on target with trends like colored denim and "Mad Men" fashion looks at its Banana Republic stores, it ranks among retailing's big winners. Better still, the company's management seems to have a grip on what had been a pesky inventory problem. Those fixes have made the stock fashionable again, driving it 72% higher.
Naughty: Chesapeake Energy (CHK)
Not only has Chesapeake Energylost 23% so far this year, but it has also courted controversy and given investors headaches with some major governance missteps along the way. Chesapeake may have been named one of the best companies to work for in America, but it didn't have to prove it deserves that title by giving its founder and CEO Aubrey McClendon unusual financial perks. The SEC has been looking into McClendon's special deals. Admittedly, the company has made progress with asset sales, but not rapidly enough, and capital spending still outstripped revenue in the third quarter.
Nice: PulteGroup (PHM)
The homebuilder is buying back $1 billion or so of its debt, just the latest piece of good news from this beneficiary of an housing market rally that has lifted the entire industry. Earnings are coming in higher than expected, and the company reported more closings on new home purchases and higher sales prices on those homes for the third quarter. The company clearly seems to have navigated the financial crisis and the real estate debacle that accompanied it, and the market has rewarded it with a 161% gain.
Naughty: Knight Capital (KCG)
Another big piece of coal goes to Knight, once a powerful Wall Street trading firm that was brought to its knees this year when one of its trading programs ran amok and cost the firm $461.1 million in losses. The only question now is which of the rival bidders will end up acquiring the rights to Knight as the company approaches the end of its independent life.
Knight isn't the only one of this year's crop of losers that likely won't survive as independent companies until this time next year. J.C. Penney's future may be in doubt, absent a restructuring under the protection of a bankruptcy court. It remains to be seen whether the advent of the BlackBerry 10 in January will be enough to save Research in Motion (RIMM) from a dire fate, though the company hasn't done much to make the "nice" list this year. And Best Buy (BBY) is facing an impossible tradeoff: Watch its sales vanish to online competitors, or come close to wiping out its margins in order to hang on to market share.
While the stock market seems likely to end the year with a respectable if not awe-inspiring gain -- barring any last-minute shocks -- it has been anything but a tranquil year, and outperforming has required the kind of smart execution on the part of financial managers that is hard to find at the best of times. And there aren't many signs that head winds will turn to tail winds in the new year. That Grinch-like market environment makes the solid gains achieved by some companies all the more impressive, even if it doesn't excuse the missteps made by others.
More from The Financial Times:
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