Skip to main content

Even Some Out of Fashion Names Are Now Back in Style

Sure, we're only one month in to 2023, but so far these stocks are starting the new year with a bang.
Comments

So far 2023 is off to a bang -- especially for growth stocks, and some rather moth-eaten brands.

This could all change, and we're only about a month in, but for now, this is quite a change. Small-cap names are leading the way so far. The Russell 2000 is up 8.1% and Russell Microcap is up 8.2%, -- both outperforming the Russell 1000, which is up 6.15%, and the S&P 500, which is up 6.18%.

So far, growth is ahead of value, too. The Russell 1000 Growth is up 7.56%, ahead of Russell 1000 Value at 4.84%. The Russell 2000 Growth is up 8.65%, narrowly beating Russell 2000 Value. Russell Microcap Growth is also up, by 9.01% vs. Russell Microcap Value at 7.66%.

Perhaps more interesting is the early performance of lower-quality names, those that were hammered in 2022, and may have a flea or two, but appeal to some deeper-value investors.

Watch and accessory name Fossil Group (FOSL) , which cratered fell in 2022, is up 26% year-to-date. That's not the whole story, either. In September, the company was dropped from the S&P SmallCap 600, which pushed shares as low as $3.28 on Sept. 6, the first trading day after the move was announced. That was a buying opportunity, a situation when shares were hurt for non-fundamental reasons, as S&P 600 Index funds had to jettison FOSL shares. For one thing, the company had gotten too small in terms of market cap to be a constituent of the index. Since then, shares are up 70%. FOSL, a member of my 2022 Triple Net Active versus Passive Portfolio experiment, currently trades at 3.16-times net current asset value.

Hanesbrands (HBI) , which fell 65% in 2022, is up 17% year-to-date. Unlike FOSL, which has had no news yet in 2023, on Jan. 7, HBI upgraded fourth-quarter revenue guidance to the high end of it's original $1.4 billion- $1.45 billion range. HBI is still unloved by the markets, likely in-part due to its nearly $3.65 billion in net debt. HBI currently yields 7.6%, a number that suggests uncertainty in the ability to maintain the dividend. There is also significant short interest, at just under 16%. HBI, which is a member of my 2023 Tax Loss Selling Recovery Portfolio currently trades at 8-times 2023 consensus estimates.

Neither of these examples are long-term buy and hold candidates, at least in my view, but were rather opportunities to buy the proverbial "fifty-cent dollar," albeit at significant risk that is not for everyone.

At the time of publication, Heller was long FOSL, HBI.