I am a lifelong Virginia basketball fan. If you paid even vague attention to the NCAA Tournament over the weekend, you probably just laughed or cringed at that sentence. My beloved Wahoos—joyously to many, humiliating to Virginia fans, and unforgettable to all who watched—became the first No. 1 seed to ever lose to a 16 seed in 136 tries dating back to 1985, with the University of Maryland-Baltimore County Retrievers playing the role of Cinderella. Strangely enough, Virginia’s historic loss got me thinking about comeback stocks.
For the last five years, Virginia has been one of the most dominant programs in college basketball, compiling a record of 143 wins and just 33 losses, including a 31-3 record this year—best of any team in the nation, even after the UMBC loss. But for all of their regular-season success, Virginia has routinely come up short in March, failing to reach the Final Four and only making it as far as the Elite 8 once. According to some experts, it’s a clear sign that Virginia’s unique brand of basketball—slow-paced offense combined with suffocating defense, though not so suffocating against UMBC—is not built for March. Pat Forde of Yahoo Sports wrote that “a team cannot win it all this way. It cannot come close. But it can make the worst kind of March Madness history.”
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Ouch. Perhaps he’s right. But how many times throughout history have teams, people and companies been counted out, only to come roaring back from the dead?
Three months ago, no one thought Tiger Woods would ever be relevant again. Four golf tournaments later, and Woods is currently the betting favorite in Vegas at next month’s Masters.
After rising to stardom in the 1970s, John Travolta disappeared from the public consciousness for more than a decade. Then “Pulp Fiction” happened in 1994, and Travolta has been one of the most famous actors in Hollywood ever since.
Microsoft (MSFT) was being eulogized about a decade ago after Steve Jobs and Apple (AAPL) passed it by. Today, it’s a $720 billion market-cap company with a stock that has outperformed Apple’s over the last two years.
Are there similar comeback stocks out there? Let’s look at a few potential candidates—stocks that went through a rough patch and were perhaps being discounted, but are now showing real signs of life.
Comeback Stock #1: Twitter (TWTR)
Twitter stock has been declared an epic failure ever since it lost two-thirds of its value in its first two and a half years of trading, bottoming at 14 in June 2016. Since then, TWTR stock is up more than 250%, including a 48% run-up already this year. At 35, this is the highest the stock has been since July 2015.
Comeback Stock #2: Best Buy (BBY)
Amazon.com (AMZN) has gobbled up much of the brick-and-mortar retail sector, particularly department stores and big-box stores like Best Buy. Indeed, BBY stock looked dead in 2012, having plummeted to 11 after rising to highs close to 60 a share in 2006. Now? The TV-and-electronics retail stock is trading near all-time highs at 69, and has more than doubled in price in the last year, thanks in large part to 7% sales growth in 2017—the company’s first annual top-line growth since 2014.
Comeback Stock #3: Bank of America (BAC)
The 2008-2009 recession sank a lot ships on Wall Street, especially in the banking sector. Bank of America didn’t completely die, but was gasping for air along with many other bank stocks, nose-diving from as high as 54 all the way to 3. Eventually, BAC stock clawed its way back to 18, only to come crashing back to 11 two years ago. Since then? Well, all you have to do is look at a two-year chart of BAC:
Bottom Line on Comeback Stocks
When disaster strikes a company, it’s easy to declare it dead. And in some cases, that knee-jerk conclusion is right. General Electric (GE), J.C. Penney (JCP) and Macy’s (M) all look pretty lifeless these days. But for every one of those, there’s a Twitter, a Best Buy or a Bank of America—formerly downward-spiraling stocks that became comeback stocks.
Hopefully Virginia basketball can follow in their footsteps.
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