Buying shares that have underperformed the market can be a very risky strategy, but being a contrarian investor can also be very rewarding.
While timing is often the key ingredient to being successful with this strategy, I think patient investors could do well in 2017 with the following four shares:
Vocus Communications Limited (ASX: VOC)
Vocus' shares are currently being priced for very low growth, which means now is a great time to consider buying shares for a medium-term recovery. The telco still faces some integration risks associated with recent acquisitions, but the experienced management team has outlined a credible strategy to negate these issues. Along with a healthy dividend yield, a better-than-expected result in February could certainly see the shares re-rated by the market.
Blackmores Limited (ASX: BKL)
2016 was a terrible year for the vitamin maker as changes to Chinese import laws put a massive dent in its local 'grey market' sales channel. Nonetheless, the demand for Blackmores' products remains strong and the company expects sales momentum to increase over the course of 2017 as the company sells more product directly into Asia. Like Vocus, the shares offer an attractive dividend yield and are priced on low growth expectations.
CSL Limited (ASX: CSL)
CSL may have disappointed the market in 2016 with a weaker-than-expected performance from its newly acquired vaccine business, but I think 2017 is shaping up to be a big year for the biopharmaceutical giant. The company is set to launch a number of new specialty treatments and should also regain the market's confidence with an improved contribution from its vaccine business. The shares are never cheap based on traditional valuation metrics, but now could be a good entry point considering the shares currently trade on a 16% discount to their 52-week highs.
Healthscope (ASX: HSO)
Healthscope is another company that lost the market's confidence in 2016 after providing a disappointing trading update. Although patient volumes in its first quarter were weaker-than-expected, the longer term outlook for the private hospital sector remains very robust. In addition to this, the company is undertaking a large number of development projects that will significantly increase the number of beds and operating theatres available to generate revenue. As a result, I wouldn't be writing the company off just yet, especially since the shares now trade on a pretty big discount to the overall healthcare sector.
