3 Large Cap Laggards Poised to Rally

The recent market pullback has spared few stocks. The rich have become a bit less wealthy, and the poor have become poorer.

In some cases, the underperformers of 2021 are former stars that have simply stepped out of the limelight. In other cases, the laggards of 2020 have continued to struggle this year.

Here we sample a little bit of everything. These three large-cap stocks are near the back of the year-to-date performance pack—but have underlying growth stories that suggest they won't be there for long.

Is Altice USA a Good Telecom Stock?

After strong performances in 2019 and 2020, Altice USA (NYSE:ATUS) stock has taken a breather this year down 4%. Yet is has trended higher since reaching a double bottom in April and looks ready to move on to a fresh record high.

Altice USA is a former division of French telecom giant Altice N.V., which was founded by billionaire Patrick Drahi. Now its own U.S. public company, it is among the nation's largest broadband communications providers. With a customer base of approximately 5 million consumers and businesses across 21 states, it also offers telephone service, WiFi, pay-TV, media content, and advertising services.

This year earnings are forecast to grow 84% driven by the introduction of new wireless services. Altice is putting the pedal to the metal in rolling out its 1-gigabyte service to U.S. households and enhanced data packages for businesses. Together, these offerings should give it more clout in the market.

Altice USA has been among the telecom operators that have benefitted from higher demand for connectivity during the pandemic. But where it differs from the AT&Ts and Verizons of the world, is where it is in its growth process. The company has been on its own for less than four years and has unique opportunities to expand its market share and cross-sell to existing customers.

The key stat to remember here is that less than 10% of Altice USA's residential broadband base has been upgraded to the faster 1 gig service. This means that the growth runway is long—and the stock has a way to go.

Is it a Good Time to Buy Veeva Systems Stock?

It seems strange to call Veeva Systems (NYSE:VEEV) a laggard considering it has been one of the best large caps of the last five years. Yet the health care IT company has so far failed to build off its six-year winning streak in 2021. A casualty of the spring tech selloff, Veeva Systems shares are now 20% below their February 2020 peak.

This isn't a stock that has had many dips since asserting itself as a leader in the life sciences software space. It offers several cloud-based solutions, but its core product is Veeva CRM which helps pharmaceutical sales reps and biotech companies manage their customer relationships. Veeva wisely hitched its wagon to Salesforce.com with whom it has a contract to host the software through 2025.

This means there are probably at least four more years of strong recurring revenue growth ahead. With Veeva CRM as its anchor, the company will continue to launch new offerings to the life sciences market to build off the success of its hit SaaS product. Along the way it will continue to gather new customers as it has been doing very well over the last few years.

Pharmaceutical companies worldwide are demanding software solutions to support their marketing and content management. Thanks to a laser-sharp focus on its sole market, Veeva Systems has become a go-to-provider. Given the deep roots planted in the market, this is unlikely to change anytime soon. And that's why the base that has been forming in the stock since the fall of 2020 will be a springboard to the next leg in the long-term rally.

Is Petrobras Stock Undervalued?

We head south of the border for our next large cap pick, Petroleo Brasileiro S.A. (NYSE:PBR). Commonly known as Petrobras, Brazil's state-own oil and gas powerhouse has delivered less than powerful shareholder returns over the last 18 months. After a 30% decline last year, the stock is down another 16% year-to-date. But there's reason to believe the bottom of the well is near.

That's because Brazil's pre-salt reservoirs are home to some of the world's richest offshore sources of petroleum. Below the Campos, Espirito Santo, and Santos basins are massive reserves that are considered one of the world's biggest oil discoveries of the past decade. Together these deep-water basins have been estimated to contain as much as 14 billion barrels of oil equivalent (boe).

This means that Petrobras will be able to grow its production at a rapid pace in the latter half of the decade as the new assets come online. And while its anyone's guess where oil prices will be a few years from now, a healthy oil price environment could lead to some record profits.

While other energy stocks have surged in 2021, this one has yet to really take off with its major growth opportunity not expected to unfold until 2024. Still, Petrobras is one of the least expensive ways to get exposure to emerging markets and oil at the same time.

It trades at 6x forward earnings and comes with a 3% dividend yield. The company is moving in the right direction with debt reduction and has one of the most enviable portfolios among emerging market energy plays. It won't be long before this laggard becomes a leader.