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Santoli: Out-of-favor stocks ripe for turnaround

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

On Wall Street as in high school, the popular crowd always seems to have more fun. Yet the rejects and oddballs often prove to be more interesting and rewarding companions over the long term.

In this year's market more than most, it seems everyone is clinging to the popular kids to navigate a harsh environment. We've all seen the uneven performance stats parsed with pursed lips: the broad S&P 500 essentially flat, but mainly thanks to a tiny group of adored growth stocks commanding most of the black ink — Facebook, Amazon.com, Netflix and Alphabet, up 30 percent to 150 percent.

Meantime, the majority of stocks lost at least 20 percent at some point, which has left a populous group of unpopular stocks for bargain-minded contrarians to consider.

Before getting into the list, let's declare the disclaimers: A stock that's down a lot isn't necessarily cheap, and even cheap stocks can get much cheaper. The crowd isn't always wrong when it's discarded a particular stock.

Still, out-of-favor stocks can benefit from low expectations as investors over-extrapolate the challenges that have damaged their value. And while no magic shift of fortunes occurs with the turn of the year, a fund manager's annual performance meter resets to zero, leading some to regard one year's losers with fresh eyes and opportunistic impulses.

So here are 17 large-cap stocks that squeezed through the following screen: members of the S&P 500 whose shares lost at least 10 percent in 2015 and have buy ratings from fewer than 25 percent of the analysts covering them. This ensures not only that the stocks will have been punished, but also abandoned by many fair-weather fans among the brokerage analyst corps — who, as a group, typically react to poor corporate results and stock performance rather than anticipate them

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