10 Comeback Companies for 2012
Nothing warms an investor's heart like a good overcoming-the-odds tale -- or at least the possibility of one.
6. Jefferies Group Inc.
Comeback kid status may have already arrived for midsized investment bank Jefferies Group Inc. (JEF).
In November, the company was on the receiving end of criticism from Egan-Jones Ratings Co. for its sovereign debt holdings in Europe -- after claiming it had no meaningful exposure to the Eurozone's troubled debt. As a result, the financial firm saw its stock price fall by as much as 46%, and the company was forced to sell off $1.1 billion worth of long and short positions in Europe.
One month later, after beating analysts' fourth-quarter profit beat estimates and watching Egan-Jones reverse its statement that the company needed to raise $1 billion in capital, Jefferies Group has seen shares rise from $2.70 to $14.50 -- the biggest increase in three years.
The social gamer had barely made it out of the gate before the investment community started giving it a collective thumbs-down. Zynga (ZNGA) fell 5% short of its $1 billion target (attributable in part to denying that crucial 15% buyer discount) and swiftly went from hot-to-not tech IPO. It was a huge letdown considering, unlike other high-profile Internet IPOs like Groupon (GRPN) and Pandora (P), Zynga was actually profitable.
But gloom and doom isn’t necessarily all that’s on the horizon for the online games developer. Its tepid public debut is the result of a complex series of factors that face all risky and similarly overvalued Web IPOs. What separates Zynga from the rest, however, is that “it's doing a better job than any other casual-gaming company of churning out hit after hit,” says Fortune magazine.
The end of April was a sunnier time for Swiss global financial services company UBS (UBS), when its stock was trading at its yearly high of $20. In the months since, UBS has suffered a perfect storm of the European debt crisis, new Swiss tax agreements and, most publicly, fraud and false accounting charges. As of this writing, UBS’ stock has slid to $11.81, losing over 40% of its value.
That being said, an increased focus on its wealth management business, which accounts for 58.7% of its stock price and added 30.7 billion francs ($32.7 billion) of net new funds in the first nine months of the year, is expected to drive UBS’ stock up. Additionally, earlier Swiss regulations aimed at curbing capital and liquidity may stand to benefit UBS.
“In a market like this one, investors are looking for solidity and safety,” said UBS CEO Sergio Ermotti. “To have a buffer of capital above our peers is something we think is a competitive advantage. But at the end of the day, what is also a competitive advantage is the solidity of Switzerland as a country.”
9. The Gap
Like the rest of its clothing retail sector kin, The Gap (GPS) has become a casualty of a less than robust pattern of consumer spending. The global chain, which operates, in addition to its own brand, Old Navy, Banana Republic, Piperlime, and Athleta stores, experienced a nearly 20% drop in share price this year and has been forced to close the doors of many of its US locations.
But when a retailer closes a door in America, it opens another in China. In addition to its burgeoning online business, The Gap expects to see the share of revenue from overseas markets, with China the cornerstone of its expansion, rise by one-half in just two years.
10. Best Buy
Demand for TVs and other big-ticket consumer gadgets may have tumbled right alongside its third-quarter net income -- which fell a staggering 29% -- but the good news for the electronic retailer is that people love their smartphones. By ramping up its mobile offerings, and with Android continuing to release a new flagship device every month, Best Buy could rebound yet. In order to stay competitive with big box discounters and online retailers, Best Buy has also begun cutting prices and offering free shipping. (As consumers discovered this week, however, the company has yet to work out its ordering logistics -- Best Buy had to cancel some customer holiday orders when it ran out the season's hottest items.)
This summer, Best Buy made headlines for its inventive approach to downsizing, not necessarily staff, but its physical space. Taking a sort of empty nester tack, Best Buy began making better use of its oversized brick-and-mortar stores by renting out square footage to smaller noncompetitors like groceries, beauty supply stores, and housewares retailers.
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