According to the Google finance screener, there have been approximately 40 stocks that have more than doubled over the last year with a price up to $15. This range, under $15, typically accounts for the most stocks that double over a year's time, but it's still a somewhat small collection of stocks. On December 27, I wrote an article entitled "6 Stocks Under $10 To Double In 2012." The article was written under the assumption that the number of undervalued stocks was plentiful and that, as stocks recovered from loss and reflected fundamental improvements, that it could result in a gain of more than 100%. It's a bullish prediction, but in a market that was priced so cheap, it made perfectly good sense.
Alcatel-Lucent (ALU) was priced at $1.57, and has since returned a 50% gain. The gains have come after a great earnings report along with several key developments that have created optimism in a stock that was pushed lower as a result of a shaky economy. My reasons for choosing ALU included margins that were improving and fundamentals that continued to progress year-over-year. I felt as though the stock had only been pushed lower due to its presence in Europe, and because investors may have felt as though high unemployment and uncertainty in Europe could have hindered profitability. So far, the company is proving all of its doubters wrong and has been among the best performers in the market.
The company is arguably trading with its best fundamentals of the last 5 years, but is still trading with a five year loss of 80%, therefore, I believe there is still a substantial amount of upside in shares of ALU. The stock has pulled back as of late, and I believe the market is due for an additional pullback. I think ALU is worth watching, and I still think it's particularly undervalued. However, after the stock's large gains, it may take time for it to exceed its current resistance of $2.65.
Pacific Ethanol (PEIX) was chosen because of its position at the time of the first article. It was trading at $0.88 after posting a quarter with record net sales, record gallons sold, and yet was at a very conservative stock price. The stock has since returned a 25% gain, after pulling back following its most recent earnings report. During the company's most recent earnings report, it nearly doubled revenue and showed substantial improvements in margins. It had another great quarter of gallons sold, and continued to strengthen its balance sheet by retiring $35 million in senior convertible notes.
The company continues to make fundamental improvements with strong quarterly performance, resulting in its first year with a positive EPS, in more than six years. However, there are still problems with the company's balance sheet, despite recent improvements. The company still has a high debt-to-assets ratio, a significant number of liabilities, and an accumulated deficit of more than $500 million. Therefore, I associate a level of risk with PEIX, but feel as though its balance sheet issues are a reflection of a 99% loss over the last five years. PEIX is showing fundamental improvements, and has bounced off its lows during the last few months. I believe a $1.76 price target is very attainable, and that it could go even higher if it continues to make similar levels of improvement in the expansion of its company. It has the ability to post very large gains in a short period of time, therefore, it should be on the watchlist of any investor with an interest in ethanol. But because of its volatility, it's a high risk investment, and at this moment, I do not own shares of PEIX, however, I continue to watch its performance.
Back on November 23, I wrote an article in which I called a trend and stated that Royale Energy (ROYL) was poised to trade higher. The stock then proceeded to return an 84% gain during the following 11 days. The large gains were a result of several key developments, but also a change in the valuation of crude, which has a direct affect on this stock, despite much of its operations being natural gas. It was a very similar set-up as in Feb 22 of 2011, when ROYL returned a 400% gain in ten days, but this particular trend has been more balanced and has been driven by fundamental improvements, which is why I added it to this list of 6 stocks to double in 2012.
ROYL was priced at $4.53 when I first wrote the "stocks to double" article, and it's now priced at $6.00, for a 33% gain. The company is still small, with a $65 million market cap, but has upside potential because of the infrastructure in place to allow it to succeed. The company just recently announced that it has begun production of its Bristol well and will be opened up to over 1,000,000 cubic ft per day. The Bristol news is just the last in a long series of encouraging developments for this company that now appears to be positioned for growth. I still believe it's very possible that ROYL exceeds $9, and perhaps more, but only if the company lives up to high expectations.
Sprint (S) is the stock that I picked with the highest level of upside in 2012. The stock has returned an 23% gain after just recently exceeding its $2.35 resistance. I chose Sprint because I believe the iPhone is a game changer, and although it does have immediate costs associated with the device, it also produces new customers and allows Sprint to equally compete with the likes of AT&T (T) and Verizon (VZ).
I was very impressed with Sprint's first quarter with the new iPhone addition. The company posted revenue growth and added a substantial number of new subscribers. Its future is brighter than it has been over the last 5 years, and with new subscribers pouring into the company, it could result in profitability at some point in the next 18 months. I think that as margins continue to improve and investors see the fundamental improvements, Sprint will trade significantly higher, most likely in the last 6 months of 2012. The only concern I have with Sprint is its balance sheet. The company has a very high debt-to-assets ratio and an accumulated deficit of more than $40 billion. Debt such as this can be devastating, especially when the company is spending so much to grow. However, I still think the positives outweigh the negatives, but the company's debt situation is something that must be monitored.
I am still very encouraged regarding Sirius XM's (SIRI) long-term potential, but I have not been impressed with its most recent performance. The stock has performed well, and posted a 30% gain since the first article, but is growing at a much slower rate than what I expected. As a result of auto sales being so high, I expected much stronger quarterly growth, and was disappointed with the company's top and bottom line earnings.
SIRI is currently trading with a forward P/E of 23.10, but has exceeded earnings expectations in 2/3 quarters. Therefore, its ratio is probably much lower, which leads me to believe there is still significant upside potential. I don't believe that auto sales will decline, and since SIRI is a stock that is directly affected by the auto industry's success and failures, I think it could still reach $3.60, but the company must continue to exceed expectations and show better year-over-year growth.
Zagg (ZAGG) is a widely debated company. It produced a lot of negative feedback when it was chosen as a stock to double in my last article. However, it has since returned a 20% gain, and I believe it still could reach $15.70 in 2012 and double its Dec. 27 price. The company just recently answered a lot of questions with its Q4 results, and showed that its a company that directly benefits from the growth and competition among communication devices.
Some question the business model of ZAGG, but I believe that in a very competitive technology market, it is reaping all the benefits of providing both style and security to devices that all global consumers seek. One of the major questions regarding ZAGG has been its margins; and in its Q4, the company stabilized margins and showed that possibly margins are improving or are at a level of maintenance. The company has $26.4 million in cash and has few current liabilities, which I find encouraging during this period of growth. Therefore, I think the company will continue to benefit from a growing and competitive market and post stronger earnings throughout the year.
I will conclude by saying that I first wrote the 6 stocks to double article because of market conditions. There was so much pessimism in 2011, that investors seemed almost incapable of seeing value in such cheap stocks. I wrote on several occasions that I nearly sold all of my holdings and bought back in December all of the stocks that I felt were the most undervalued. The stocks on this list are just a few that fall in this category and were undervalued at the time. The S&P 500 has since returned a gain of 8.24%, and the Nasdaq has returned nearly 14% in the same period, which is simply incredible. However, the majority of the market's gain has come from the larger companies, as there are still a significant number of smaller companies that have yet to recover. The six stocks on this list have each recovered from loss, but I think there is still fundamental improvements that are yet to be realized.
Disclaimer: The information in this article is for informational purposes only, and is not to be used to determine any investment decisions. All investments require due dilligence, the information in this article is not sufficient to make an investment decision. The prices for the stocks mentioned are accurate as of Friday March 9 2012 close of market.