There's usually a good reason a stock will tumble to a 52-week low, but such low prices mean that investors should take a closer look to understand why it was beaten down in the first place and whether it could reveal a good chance of recovery.
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That wasthe case with Tronox (NYSE: TROX), Exelixis (NASDAQ: EXEL), and Resolute Energy (NYSE: REN), which after hitting a low point have enjoyed returns of nearly 400% or more from their 52-week lows. Let's take a look at why these were some of the market's most stellar performers.
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Titanium dioxide, or TiO2, is the whitest stuff on Earth. It's used in everything from sunscreen and toothpaste to food coloring and vehicle coatings. Milk is whitened with it, as is the cream in Oreo cookies. Paint is a particularly heavy user of the pigment -- TiO2 makes the coating even more opaque -- and accounts for half of the industry's revenues. The market analysts at Grand View Research forecast that the global TiO2 market will grow by a compounded 9% annual rate between now and 2025, hitting $66.9 billion in value.
After several years of falling prices for the pigment, producers like Tronox, the world's fifth-largest producer of TiO2, began enjoying a turnaround in the pricing environment last year as demand from the automotive and construction industries -- the two biggest users of it -- grew. Three times in 2016, industry leader Chemours raised its prices for TiO2, only to be followed by others like Tronox and Huntsman, the fourth-largest producer.
Tronox's bottom line has benefited from the improved conditions, which narrowed its losses from $0.78 per share to just $0.14, and the company expects the gains to continue through 2017 at least. Its stock is up over 368% from its low point, when it traded below $4 a stub, meaning $5,000 invested in the TiO2 producer at the time would be worth over $18,000 today.
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Mid-cap cancer biotech Exelixis has surged more than 415% from its low point as the handful of therapies it has on the market catch on. However, despite a number of positive developments for them at the time, there were still concerns its renal cell carcinoma treatment would lose out to the competition, namely Bristol-Myers Squibb's Opdivo. Those worries helped drive its stock down from around $6.50 a share in late 2015 to below $4 a stub in early 2016.
As it turns out, Exelixis' Cabometyx is the one taking market share,and tracking toward a $200 million run rate in sales. Exelixis is also planning for the next phase, when it seeks to expand Cabometyx's addressable market by preparing to file an application to be able to treat previously untreated patients with advanced renal cell carcinoma.Additionally, Cometriq, a treatment for advanced medullary thyroid cancer, generated $42 million in sales for 2016.
Because Exelixis operates in the cancer research field and has two successful drugs on the market, the potential for a big pharma buyout of the company grows, asat least one company assuredly is taking notice of the gains the biotech is making. That could be helping to fuel Exelixis' stock, too, which traded a little over $4 a share a year ago and now goes for more than $21 a stub, turning a $5,000 investment into one worth over $20,700. It should be noted, though, that Exelixis has often been the subject of takeover rumors over the years, and nothing has ever come of it.
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The biggest gainer of all, though, is oil and gas driller Resolute Energy, which has a primary focus in the Permian Basin. It had suffered along with much of the rest of the energy sector because of the collapse in oil's price, so much so that there were doubts about its ability to make it through to the other side.
But last year, it set about shoring up its financial condition, in part by selling for $110 million certain midstream gas-gathering and water-handling systems in its Appaloosa and Mustang project areas in Reeves County, Texas. It used the proceeds to reduce debt and fund development in the Delaware Basin in west Texas,and it also made a small sale this year of some New Mexico assets for $15 million. It also had a secondary offering of almost 4.4 million shares in December that netted it approximately $161 million.
Improved well results in the Delaware Basin also indicate that Resolute will come through fine, and that its turnaround plans are working as intended. Ratings agency Moody's even upgraded its credit rating with a note saying it believed its outlook was stable.
Over the past year, Resolute Energy's stock has surged a mind-blowing 1,800% from its 52-week low, going all the way from a meager $2.40 a share to more than $44 a share today. Remarkably, last month, it hit almost $50 a stub, but it gave back some of those gains because of the decline in oil prices as shale production has storage facilities bursting at the seams.
Still, a $5,000 investment in Resolute a year ago would be worth more than $88,500 today. There may still be catalysts for further growth despite that crazy run, but it's still a loss-inducing operation, just as it has been for the past four years, and though the losses are much narrower than they were the year before, it still has a long way to go before it's profitable.
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