It’s the racing time of the year with Saturday bringing the Caulfield Cup, which is the dress rehearsal for the Melbourne Cup in three Tuesday’s time. And the greatest horse trainer of the Cup’s history was Bart Cummings who once said when reflecting on his training of great stayers, that “patience is an asset”.

The same applies when it comes to investing.

Training a wonderful thoroughbred to win a time-honoured race is the high-brow aspect of the sport of kings. On the other hand, punting is the low-brow aspect and it can be compared to speculating on stocks as opposed to being an investor in quality companies for the long term.

Of course, you can try and trade by buying a stock and flipping it once you’re happy with the gain, but timing can be tricky — just like betting on the four-legged lottery on Cup Day.

Right now, ASIC is watching those dodgy types on the stock market who are doing something called “pump and dump”. This involves using the online world to talk up a stock and get some tip-off to go viral via chatrooms, Facebook, Twitter or whatever. And once momentum is created, the architects of the scam dump the stock, making off with a nice profit and leaving the fooled latecomers with losses.

Be really careful of that kind of scheme.

In contrast, there’s a more patient play that can be rewarding, and the key word is CAN.

There are no guarantees with stocks but I thought I’d let you know how I play my more speculative hands by looking at stocks I hold that have been losers, but I think over 2022 they’ll have upside.

The first is the artificial intelligence and machine learning company, Appen (ASX ticker code: APX).

This is a company that has disappointed the market and has struggled since the Coronavirus destabilised its customers. The company analysts surveyed by FNArena thinks this company has 44% upside and interestingly, all four expert company-raters are positive on the stock.

Appen is a quality company with a few challenges now but, over time, I suspect it will beat those. And I really hope the Citi analysts know what they’re talking about.

The chart above shows how popular this company was before the Coronavirus. I suspect that some of that popularity will eventually show up in a future share price but you’ll have to have patience!

Appen (APX)

Another company that I’m prepared to apply some Bart Cumming’s patience to is Nuix Ltd. This was a $5 stock that after listing spiked to $11.85, before management’s misreporting and unusual practices led to a huge sell-off. It’s now $2.52 but the one analyst (from Morgan Stanley) that assesses the company has a target price that implies a whopping 156% gain is out there!

Nuix specializes in transforming massive amounts of messy data – from emails, social media, communications and other human-generated content – into searchable, contextualized information.

It has huge customers in the public and private domain and is regarded as a quality business even if its management didn’t pass the same test. A lot of smart people at the investment bank Macquarie have been associated with this company and I suspect it will one day reassert itself as a quality business, but that might take time.

Nuix (NXL)

Investors will need some Cummings’ patience with this one as well.

The next stock that has been a disappointing performer (I guess like a horse that might be out of form) is A2Milk, which actually has had a couple of good days this week, and over the past month as well.

This chart depicts the sour story of A2Milk’s great reputation as a quality company that has gone off the boil.

A2Milk (A2M)

This company has gone from greatness to a stock price smashing that’s usually reserved for second-raters, not quality performers.

The company now has to contend with a class action taken out by the law firm Slater and Gordon, because the lawyers say the company misled investors.

Despite this, its share price has bounced back over the past month, which could be a positive sign.

A2M One Month

So, what went wrong and why the bounce?

Well, the Coronavirus was no help. A part of A2Milk’s profit came from the Chinese daigou trade where Chinese travellers bought baby formula and took it back to sell at home.

The company also had inventory issues and Beijing was encouraging its citizens to support homegrown products. And then there were four downgrades from the company and the reliability of the company’s reports was called into question.

So why the bounce? Well, this week a rival company, Bubs Australia, announced a better-than-expected revenue growth number and it rubbed off on A2M.

Bubs Australia (BUB)

I don’t know when A2M will be out of the woods but I’m giving it another year.

As a group, the analysts tip a 12% fall in its share price. Some tip a 20% fall, but these people are more short-term compared to a long-term investor like me! This might need more than patience. It might need divine intervention, or possibly the arrival of Chinese tourists again, but that could be six to 12 months away.

Then there’s the worry that Beijing might discourage tourists from coming to Oz, considering our souring relationship politically right now.

My final patience play is Fortescue (or FMG).

The consensus of analysts thinks there’s 26.8% upside and Ord Minnett tips a 74% upside. The iron ore price has fallen recently but I think FMG will benefit from the economic boom of next year. And after the February Winter Olympics in China, that country could pump up production, which will be good for the iron ore price and FMG. Right now, the Beijing leadership would like blue skies for China while the Olympics is on but eventually it will be back to business as usual, and that’s when demand for iron ore should rise.

Five out of the seven analysts see a higher share price going forward.

Fortescue Metals Group (FMG)

This five-year chart of FMG shows the bounce-back history of the company. I like the fact that its founder and chairman, Andrew Twiggy Forrest, is pushing hard into the green hydrogen energy plays that will add good diversification to the company.

I don’t expect a big gain soon but with Cumming’s-like patience in 2022, we should see some nice results.

(I looked at these companies in my Switzer Investing TV program on YouTube and you can check it out with Westpac’s chief economist Bill Evans with his tip of a big, big boom year for the Aussie economy next year, which has to be good for stocks! And being a long-serving AJC board member, he gives us his Everest tip for the big race at Randwick on Saturday. Can his economist computer models also pick winners at the gee-gees?)