The Motley Fool

2 Unreasonably Battered Stocks Primed for a Roaring Comeback in 2020

Image source: Getty Images.

When you’re shopping for stocks to buy, keep in mind that past performance is no guarantee of future results. Pason (TSX:PSI) and Transcontinental (TSX:TCL.A) are seemingly battered stocks in 2019. Both companies, however, are prime candidates for a roaring comeback in 2020.

Judging from the forecasts of analysts covering the stocks, there’s bullish sentiment building around the stocks. You could earn massive profits next year if you time your purchase this year-end.

Essential element

Pason is a $1.1 billion oil and gas equipment and services company. It provides critical instrumentation and data management systems for drilling rigs. This energy stock is down 27% year to date, although it was performing relatively well last year.

The company remains a top driller in the industry except that the oil and gas drilling business is experiencing a slump. Fortunately, the dip in the stock price presents a great buying opportunity for investors. The services Pason provides are of paramount importance in oil and gas operations.

Despite the general weakness in the usage of oil and gas, global demand is on the rise and people are optimistic that drilling activities will perk up in the medium term. While there is a lull in business, Pason is busy with its research and development activities.

Once normal drilling operations resume, analysts see Pason making a grand comeback. The price can climb back to the $20 mark as it was at the start of 2019.

Full synergy is coming

Transcontinental is underperforming, with the stock showing a 20.6% decline so far this year. As of this writing, TCL.A is trading at $14.53, which is a bargain and a good entry point.

The company is at the tail end of its business transformation. After primarily operating as a newspaper publishing company, Transcontinental has added the packaging and media segments to its core publishing business. This $1.28 billion company is now carving a name in the flexible packaging business in Canada.

The results of the synergy are starting to produce results, as is evidenced by the 18% increase in cash flows in the recent earnings report.

In 2020, the reorganization of activities at its printing platform will take effect. The goal is to optimize the platform by adjusting capacity and costs to business volumes.

Also, Transcontinental is a high dividend payer with a dividend track record of 17 years. With a potential upside of 85% based on analysts’ forecasts plus the 5.8% dividend, you’ll be getting your money’s worth in 2020.

Minimal exposure of $10,000 in Transcontinental will produce an annual passive income of $500. As the company achieves full synergy (printing, packaging, and media segments), you can gradually increase your holdings. The price, however, might be higher when business is running smoothly on all cylinders.

Bright outlook

Pason and Transcontinental have been operating for more than four decades. Both survived the 2008 financial crisis. The stocks are in a slump in 2019, but a roaring comeback could happen next year. While the situation is fluid, the signs point to a brighter outlook in 2020.

Looking for the Next Potential Netflix? We’ve Got You Covered with These 3 Free Stock Picks

Motley Fool Canada's market-beating team has just released a new FREE report that gives our three recommendations for the Next Gen Revolution.
Click on the link below for our stock recommendations that we believe could battle Netflix for entertainment dominance.

Click Here to Get Your Free Report Today!

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Pason Systems. The Motley Fool recommends TRANSCONTINENTAL INC A. Pason Systems is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.