The worst-performing stocks of any given year often rebound at the start of the following year as investors hunt for bargains and bet on a recovery.
Alex Meintel of Goldman Sachs acknowledges that the rule hasn't always held over the last few years, but he says there are good reasons to think the hardest-hit companies of 2020 will spring back in the first three months of 2021. One is simple: It's been a long time since the market's worst stocks looked this bad compared to the rest.
He says the most promising recovery candidates in the first quarter reflect at least one of six themes. The first group consists of "value" picks that are trading at attractive levels and could experience a sustainable recovery as analysts raise their estimates.
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