Since January 2012, Sprint Nextel Corporation (NYSE:S) has been one of the best performing midcap stocks, with a gain of 220%. While these gains are large, Sprint was a bit of a late bloomer, and now, Alcatel Lucent SA (ADR) (NYSE:ALU) looks to be following a similar path.
2012’s late bloomer of the market
In 2012, Sprint Nextel Corporation (NYSE:S) was my “Value Of The Year” selection. For many months, I wrote article after article explaining why I believed that Sprint was destined to produce great gains.
In fact, I even promoted the stock in the most public way possible. In my book, Chapter 9 “Behavioral Selling,” I went out on a limb with my Sprint prediction by saying:
“Today, Sprint is trading at $2.29, and I promise that by the time this book is published the stock will be trading at least 75% higher.”
Just so you know, I wrote the book in the first four months of 2012. During that time, I was highly criticized for my selection of Sprint Nextel Corporation (NYSE:S) as 2012’s value of the year. Today, we all know how the stock has performed – but up until May 2012 – Sprint traded with gains of just 2% while the S&P 500 traded with gains of 11%.
In my opinion, Sprint Nextel Corporation (NYSE:S) is a true example of how a value investment works in the market. A value investment should be easily identified with common sense, but often takes longer to appreciate. When it finally does appreciate, the stock has a tendency to explode with abrupt gains.
In the case of Sprint Nextel Corporation (NYSE:S), the market valued its worth at more than $5 per share in 2011 with falling subscribers and revenue — without the iPhone — and with a rising debt-to-assets ratio. When the company begun to sell the hottest phone in the world (iPhone), and was priced at $2.30, my thinking was that Sprint was worth a whole lot more than in the year prior at $5.
Following a similar pattern?
My outlook for Sprint was not complicated, it was hardly fundamental, but it was correct. In 2013, I made, what I thought, was a very similar call with Alcatel-Lucent.
Much like Sprint Nextel Corporation (NYSE:S), I have continuously been told that I am wrong – in part because I made 2013 a joint selection between Alcatel Lucent SA (ADR) (NYSE:ALU) and Rite Aid. While Rite Aid has exploded with fundamental gains, Alcatel has lagged the broader market, having produced a YTD loss of 2% as of May 1.