When I think about sleeper stocks, my mind goes to fictional character Freddy Krueger. Stay with me for a second. As you may know from the film series, “A Nightmare on Elm Street,” the protagonists of this horror franchise cannot afford to fall asleep. I’m not going to get into it here but bad things happen if they snooze.
And it’s the same principle with these sleeper stocks. Sure, they look ugly and perhaps downright irrelevant on the surface. And even I’ve been critical of these ideas in the past. Still, if you ignore them, they can cost you. Not in the macabre, wrong-end-of-a-fillet type of deal but rather in absorbing an opportunity cost.
In other words, when people say past performance is no predictor of the future, that also applies to previously underwhelming enterprises. On that note, below are sleeper stocks to consider in 2024.
Hasbro (HAS)
On the surface, Hasbro (NASDAQ:HAS) might not seem like one of the sleeper stocks. Rather, the investment narrative went to sleep and for apparently justifiable reasons. The shame of it was that HAS was soaring higher to September of last year. Since then, however, HAS began tumbling. In late October, Hasbro and its main rival got beat up due to consumers cutting back on spending.
However, the most recent jobs report indicates that the economy continues to be surprisingly resilient. Therefore, the Federal Reserve has hopes for engineering what previously seemed a long-shot soft landing. If so, the personal saving rate – which increased from November 2022 to November 2023 – may soften this year. If that materializes, Hasbro could start a comeback effort.
Also, what could surprise the bears is the volume of sold calls in the options market. Specifically, Fintel’s screener for options flow – which exclusively targets big block transactions likely made by institutions – reveals what are effectively short “obligatory” positions in the derivatives market.
If the bulls wish to squeeze out the bears, HAS could start flying. Therefore, it’s one of the sleeper stocks to pay attention to.
Bumble (BMBL)
For quite some time, I must admit that I wasn’t a fan of dating app Bumble (NASDAQ:BMBL). Yeah, I get how seemingly everybody loved the new social relationship platform. As well, many praised the ethos of the company. Basically, for users in traditional relationships, women make the first move. Bumble founder Whitney Wolfe Herd explained that this framework facilitates gender equity in relationships.
May I say the quiet part out loud? It also unnecessarily frustrates half the user base. Let’s face it – there can only be so much social equity demands you can force on male users before they walk over to another competing platform. Unsurprisingly – at least in my opinion – BMBL cratered.
However, the brand is fresh and relevant so there’s hope for a comeback here. As you might imagine, some folks have had enough, selling BMBL call options. And some of these transactions are big block trades that are yet to expire. That could create a feedback loop benefiting contrarian bulls if BMBL starts moving higher.
I believe this is a situation where the pessimists could find themselves exposed. For that, it’s one of the sleeper stocks to put on your radar.
Peloton (PTON)
Fundamentally, Peloton (NASDAQ:PTON) is, at least for me, the most controversial idea on this list of sleeper stocks. Last month, I stated that it’s one of the overvalued tech plays and that you should probably avoid it. Frankly, Peloton is a tough pill to swallow. It suffered a product recall due to an injury-causing defect. As well, insiders began selling a significant number of shares.
If that wasn’t worrying enough, the declining revenue growth trend made its lowly sales multiple legitimately appear a value trap. However, I also mentioned in that InvestorPlace article that the upside risk factor centered on big block sold calls. Following publication, a major trade (or traders) sold 1,456 contracts of the Feb 16 ’24 4.00 Call. For underwriting the risk, the bear(s) collected a premium of $366,250.
Now, let’s think about this. You’re going to bet that PTON stock won’t materially rise above $4 when the transaction occurred deep in the money (ITM) at $6.42? This is the equivalent of a poker game when someone goes all-in.
Are they bluffing? I don’t know but that’s a massive risk that I certainly wouldn’t take.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
