“There’s gold in them thar hills”
– 1849 San Francisco gold prospector
I’m constantly looking for new names to add to my watch list. One way is to review the 12-month winners and losers and investigate the circumstances that drove them to their place of prominence.
I’ll start with the two lists – winners and losers – then make some observations.
I won’t analyze all 20 of these names, because that would be time-consuming for me and boring for you. So I’ll just take the top and bottom names, make some observations, and leave it to you to take it from there.
Ion Geophysical
IO is a growth and momentum story. The stock is down -25% from its high, due to a poor quarter. The analyst community still expects explosive growth in revenue and earnings, but after a big miss in Q1 those rosy projections have started to come down.
ION Geophysical Corporation provides geoscience products, services, and solutions to the oil and gas industry worldwide. It operates through three segments: E&P Technology & Services, E&P Operations Optimization, and Ocean Bottom Services.
The E&P Technology & Services segment offers complete seismic data services, including survey design and planning, data acquisition, project management, advanced processing, and imaging services, as well as reservoir characterization and interpretation services.
The E&P Operations Optimization segment provides command and control software systems, as well as related software and services for towed marine streamer and ocean bottom seismic operations, and for survey design. This segment also manufactures and repairs marine towed streamer acquisition and positioning systems, and analog geophone sensors.
The Ocean Bottom Services segment offers survey design, planning, and optimization services to maximize seismic image quality, operational efficiency, and safety; data acquisition; and data processing, interpretation, and reservoir services. This segment also manufactures re-deployable ocean bottom cable seismic data acquisition systems.
ION Geophysical Corporation markets and sells its services and products through direct sales force and third-party sales representatives. The company was formerly known as Input/Output, Inc. and changed its name to ION Geophysical Corporation in 2007. ION Geophysical Corporation was founded in 1968 and is headquartered in Houston, Texas.
12-month price chart for Ion Geophysical
The reaction to the bad quarter is evident in the chart. A 25% haircut is pretty harsh for a stock that has made lots of money for investors. But investors are fickle, and there is no loyalty for a stock that disappoints.
The question is, was this a one-off stumble or something more serious? I don’t know the answer, but you might be able to suss it out with the right amount of due diligence.
Roadrunner Transportation Systems
Roadrunner Transportation Systems, Inc. provides asset-right transportation and asset-light logistics services. The company operates through three segments: Truckload Logistics (TL), Less-than-Truckload (LTL), and Global Solutions.
The company’s TL segment arranges pickup and delivery of truckload, intermodal, and ground and air expedited freight through its network of 42 TL service centers, 40 company brokers, and approximately 90 independent brokerage agents in the United States, Mexico, and Canada.
It also offers temperature-controlled, dry van, intermodal drayage, and flatbed services; and specializes in the transport of automotive parts, refrigerated foods, poultry, and beverages, as well as on-demand ground and air expedited services.
The company’s LTL segment is involved in the pickup, consolidation, linehaul, deconsolidation, and delivery of LTL shipments in the United States and Canada through a network of 44 LTL service centers and approximately 150 third-party delivery agents.
The company’s Global Solutions segment offers domestic and international transportation and logistics solutions, including pricing, contract management, transportation mode and carrier selection, freight tracking, freight bill payment and audit, cost reporting and analysis, dispatch, and freight consolidation and warehousing. This segment also provides domestic and international air and ocean transportation, and customs brokerage services.
Roadrunner Transportation Systems, Inc. is headquartered in Downers Grove, Illinois.
12-month price chart for Roadrunner Transportation Systems
Roadrunner looks like the exact opposite of IO in terms of stock performance and analyst ratings. Similar to IO, Roadrunner laid an egg last quarter, but unlike IO, the analyst community appears to have turned on this name. At a price of $1.67 there are two ways to play it. Either go long (take a flyer) and maybe see a pop to $3 or so, or short the stock. I don’t recommend shorting a stock at this low price, but the investment community seems to be saying that Roadrunner is headed to zero.
Final thoughts
This article was an exercise in developing a rich watch list. I don’t advocate rushing out to buy any of the 20 names on the winners & losers list. I suggest that you consider the list as a starting point for further research.
There are two opposing forces at work here. One is momentum, and the other is reversion to the mean. These forces are well established in market history, but the tricky part is figuring out which of them will dominate in the future. IO is clearly a monster momentum stock, but has the momentum been broken? Or will it regain its footing and continue its march higher? You decide.
Roadrunner is a broken stock. It clearly has fundamental problems, and it may not survive. For those of you who are bottom-fishers, this might be a good speculation for a short-term pop. For you short-sellers, this looks like a dangerous play, but in the event that the stock ends up in bankruptcy, it’s a 100% gain for you.
It’s all food for thought. Use it as you see fit.