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Holly LaFon
Holly LaFon
Articles (10163)  | Author's Website |

Stocks the Market Is Discounting the Most This Summer

Business challenges sent their prices down recently

September 04, 2019 | About:

The market whipsawed over the past three months as major macroeconomic events, from tariff battles to yield-curve inversions, bombarded investors. Ultimately, the S&P 500 index has ended up about 5.89% higher on the second trading day of September than it was at the start of June. While the index has climbed 16.32% for the year to date, it has gained only 0.59% since a year ago.

Across sectors, energy has offered investors the worst returns. The only group with negative returns, energy stocks in the Energy Select Sector SPRD (XLE) sank 3.9% over the past three months. Investors were hard-pressed to find gems among laggards.

Every other sector surged for the period, with the best-performing Real Estate index (XLRE) soaring 28.29% and Technology (XLK) not far behind at 26.75%.

The best- and worst-performing individual stocks in the index were about even. GuruFocus data shows that six stocks declined more than 30% for the period, while five stocks rose more than 30%.

The worst group featured two health care companies, a tech company and a retailer. As summer winds down, investors seeking mispriced securities to add to their portfolios for the fall may look at the companies the market discounted the most: Nektar Therapeutics Inc. (NASDAQ:NKTR), Align Technology Inc. (NASDAQ:ALGN) and Cabot Oil & Gas Corp. (NYSE:COG)

Nektar Therapeutics Inc. (NASDAQ:NKTR)

Nektar Therapeutics is a biopharmaceutical company in the development stage focusing on drugs to treat cancer, auto-immune disease and chronic pain. Based in San Francisco, it has eight products in its pipeline, with four in phase 3 clinical trials.

The company’s stock plunged in August when it held a conference call for its second quarter 2019 results. In the call, Nektar’s management told investors that it had flubbed part of its cancer drug manufacturing, causing concern among investors that its trial results might be flawed.

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Nektar shares plunged 50% over the past three months and 48% year to date, closing at $16.96 Wednesday.

Four investors GuruFocus tracks own shares of the stock. Pioneer Investments (Trades, Portfolio) and Primecap Management reduced their holdings in the second quarter, while Jim Simons (Trades, Portfolio)’ firm added to its stake. Vanguard Health Care Fund (Trades, Portfolio)’s position was unchanged.

Align Technology Inc. (NASDAQ:ALGN)

Align Technology originated the Invisalign orthodontic alignment system and the iTero Intraoral scanning system and services. Its stock’s sharpest downturn occurred in July when it released second-quarter financials. While Align’s revenue reached the high-end of guidance and Invisalign sales volumes grew 24.6% year-over-year, the company missed its guidance for case shipments. Weakness in China influenced by a “tougher consumer environment” and a slowdown in young adult cases in North America negatively affected results, the company said in a statement. Align also issued guidance for the third quarter that reflected “a more cautious view for growth” in its Asia Pacific business.

Shares of Align Technology lost 42% over the past three months and 16% for the year to date. The stock closed at $176.40 per share Wednesday.

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Align Technology appears in the portfolios of nine investors GuruFocus tracks. Among them, Paul Tudor Jones (Trades, Portfolio) increased his position the most in the second quarter, at 58.91%. Franks Sands has the largest position with 3.9% of shares outstanding. Andreas Halvorsen (Trades, Portfolio) reduced his position by 35.35%, the most of all investors tracked.

Cabot Oil & Gas Corp. (NYSE:COG)

Cabot Oil & Gas is an exploration and development company with operations primarily in the Marcellus Shale of northeast Pennsylvania. Headquartered in Houston, it focuses on developing natural gas resources.

The company’s second-quarter results release precipitated a drop in its share price. Cabot reported earnings per share of 36 cents, beating estimates by 2 cents. It also beat on revenue, reporting $534.1 million versus estimates of $491 million. But the company lowered its net production guidance for the full year to a range of 16 to 18% from its previous target of 30% due to its acquisition of land that pushed some production back to late December or early January.

Shares of Cabot fell 32% over the past three months and 23% year to date. The stock closed at $17.13 Wednesday.

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Ten investors GuruFocus tracks owned shares of Cabot in their portfolios in the second quarter, with five starting new positions. Ray Dalio (Trades, Portfolio) added the most to his holding, increasing it by 97.9%. Three reduced their positions, including Paul Tudor Jones (Trades, Portfolio), whose 35.01% decrease was the largest.

See more stocks with the biggest price declines at the All-In-One Screener here.

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About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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