In the early stages of 2021, the stock market has seen some interesting leadership changes develop. Sectors that were out of favor in 2020 are suddenly all the rage. A rotation into small cap and value stocks that began late last year has carried into the new year.
This means that at the individual stock level there have been some dramatic swings that have unfolded since the calendar flipped to January. Here we look at three S&P 500 companies that were among the biggest losers last year but are the biggest winners so far this year. Can they continue to carry the torch as the year goes on?
Is the Rebound in Occidental Petroleum Stock Sustainable?
Occidental Petroleum (NYSE:OXY) has been a remarkable worst to first story. The stock finished dead last in last year's S&P 500 derby down 58%. This year sits behind only media companies Discovery and ViacomCBS with a 53% year-to-date return.
The mirror image performance is largely due to WTI crude oil prices which have rallied to above $60 amid more favorable demand-supply dynamics. The recent weather issues in Texas and an improving economic outlook may help extend the rise in oil.
While the rebound in Occidental Petroleum shares has been tied to the oil market, that is just one half of the equation. The other side of the business is gas and natural gas liquids (NGL). Natural gas prices are also trending higher amid lower-than-normal winter temperatures in the U.S. and increased demand from Asia.
Its early but for Occidental Petroleum to double and reach at least $35 by year end wouldn't be a stretch. The company has a bigger presence in the Permian Basin these days thanks to its acquisition of Anadarko Petroleum. Higher production volumes and better commodity pricing is the perfect combination to keep this comeback story gushing.
Will Under Armour Stock Continue to Rally?
Under Armour (NYSE:UAA) is another company on the comeback trail. After a 20% drop in 2020, its stock is up more than 30% this year placing it in the top 15 of S&P 500 performers.
The maker of athletic apparel and footwear struggled last year with high school and college sports activities cancelled or limited. Since the company depends heavily on these channels, it ultimately posted a loss for 2020.
But thanks to many team sports planning to hit the field this spring and aggressive cost cutting measures, Under Armour is on track to be profitable by the time it reaches the 2021 finish line. Management has said it expects profit to be below that of 2019, but more importantly, things seem to be looking up for Under Armour.
A strengthening e-commerce platform is also behind the recent resurgence. The launch of e-commerce businesses in Mexico, Australia, New Zealand, and elsewhere has helped spur growth and make Under Armour less dependent on its main U.S./Canada business. Customer demand in the Asia-Pacific region has been particularly strong. As it continues to take a page out of Nike's book and expand its direct-to-consumer capabilities and increase its overseas presence, Under Armour's performance should continue to improve.
The embattled performance clothing company is in the midst of a restructure that has the potential to bring it back to the glory days of 2016 when it was viewed as a more formidable competitor to Nike. This journey will be a marathon rather than a sprint, but if Under Armour starts to flash signs of improving profitability investors may want to jump in before its stock runs away.
Is Simon Property Group a Good REIT Stock?
Shares of Simon Property Group (NYSE:SPG) declined 46% last year due to the REIT's exposure to the retail real estate market. The owner of malls and outlet shopping centers had a difficult time collecting rent payments from its struggling tenants and had little interest for leases from new tenants. Mall closures and an accelerating shopper preference for e-commerce left some investors wondering if Simon Property Group's run was over.
Flip the calendar to 2021 and Simon says its outlook is somehow looking brighter. All the company's 200-plus properties in North America, Europe, and Asia are open for business. And while customer traffic remains muted, the market has come to the consensus that some traditional shopping activity is better than none. Efforts to redevelop its properties to usher out clunky department stores and bring in higher rent restaurants and boutique shops also bode well for improved financials.
Plus, Simon Property Group has somewhat embraced the motto, "if you can't beat 'em, join 'em". The REIT is exploring ways to capitalize on the e-commerce boom and offset its physical retail exposure by starting some new e-commerce ventures. Its joint venture with Rue Gilt Group, ShopPremiumOutlets.com, offers discount designer brand clothing and accessories and pits it against more established e-commerce storefronts like Nodrstrom's Rack and Macy's.
Several challenges remain for brick-and-mortar retail in the post-COVID world. Some people will remain jittery about returning to crowded malls even as things improve. Others that have grown comfortable in their online shopping ways may never return.
So, with Simon Property Group stock already up 26% this year, investors may be tempted by the momentum and still high dividend yield. However, given the ongoing COVID-19 headwinds for traditional retail and Simon's unproven e-commerce forays, it may be better shop for growth and income plays elsewhere.
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