After years of big gains in the market, two things have happened. First, most folks 401k is looking pretty good right now. Second, the market is expensive, mainly the S&P 500. That’s why I have publicly said several times that the best policy in 2017 is to have a lot of cash on the sidelines, and to downsize your pricey winners.
However, one can’t deny the fact that stock laggards are cheap, like dirt cheap. Many of the stocks that fell significantly in 2016 were well deserved, but several of those losses are overextended. As a result, if you are like me with cash to spare, and have had several great years, it might be a good idea to buy a couple of the following stocks.
Granted, don’t put 50% of your portfolio in these stocks. Hell, they are risky, and there is a reason they are laggards. However, 5-10% of your portfolio allocated to stocks that everyone else is selling, might not be a bad policy.
Stock laggards to buy: Fitbit
2017 is starting off just like I expected for Fitbit Inc (NYSE:FIT). While it is not a company that I particularly like, I have said it is cheap, expectations are beatable, and that 2017 will be a breakout year for Fitbit.
There are two key reasons I like Fitbit in 2017. First, its failure to launch new smart wearables in the second half of 2016 illustrated its dominance in the industry. Second, despite not launching any new innovating products, Fitbit still won the holidays.
Fitbit stock lost 75% of its value in 2016. Three months ago analysts expected Fitbit to earn $1.40/share in 2017. Now, Fitbit is expected to earn $0.66/share. That’s a big difference, and combined with the strong selling pressure sets the perfect stage for a breakout year.
However, the wildcard is whether Fitbit launches a new smart wearable. It needs too. If Fitbit launches a Blaze 2 in the first quarter, and really flexes its wearable muscles, Fitbit stock could double very quickly.