I've Got Two Contrarian Bets for 2025

The market has become notably more uncertain in recent weeks.  

The election feels like it occurred ages ago, even as the new president hasn’t even been inaugurated yet. The incoming administration will be another item to factor into our investment decisions. Significant changes in the quarters ahead are almost certain, especially when it comes to immigration policies and trade relations. In addition, rising debt yields is something both the new administration and investors will have to come to grips with. Yields are moving up sharply again this morning due to the better-than-expected December jobs report.

My regular readers know that I feel the overall market is both overbought and top- heavy. I am expecting a hiccup of 5% to 10% at some point in 2025 and have a decent amount of dry powder that I hope to deploy at lower entry points. That said, while the music still is playing one has to dance to some extent. I have made some contrarian bets recently, small investments via covered-call orders in some out of favor stocks and sectors. Today’s column will explore a couple of these:

Let’s start with the Boeing Company BA. It is hard to find a well-known company that had a worse 2024 than this aircraft manufacturer. The company suffered from much publicized safety issues, poor management, cash flow concerns and labor strife. Boeing simply seemed incapable of doing anything right last year. But the company has brought in a new CEO to help turn it around. Boeing also has a large and stable defense business and is essentially a duopoly with Airbus in the commercial aviation industry. The company importantly has an order backlog of some $500 billion. It is just hard to see how 2025 gets worse. I had the same feeling around The Walt Disney Company DIS when it dipped below $90 last summer. That's a bet that has worked out well to this point.

Another name is in the refinery sector, which was pummeled in 2024 starting in early spring as crack spreads worsened. I have been building a position in Valero Energy Corporation VLO, the largest refinery operator in North America, recently. The stock might have formed a bottom late in 2024 and has acted a bit better since. The shares probably benefited a bit from the end-of-tax-loss selling at the close of the year. Its renewable diesel and ethanol segment diversifies its revenue streams somewhat.

The company’s balance sheet is in good shape. While profits and revenues have fallen significantly, Valero remains profitable unlike some other refinery names. The stock also sports a 3.4% dividend yield and is valued at five-times fiscal 2023’s earnings per share, which benefited nicely from higher-than-historically average crack spreads during that year.

Both Boeing and Valero took their licks in 2024, and their shareholders suffered as a result. That said, significant bad news does seem priced into their stocks at current levels.

At the time of publication, Jensen was long BA, DIS and VLO