Editor’s Note: Personal Finance has been in continuous print since 1974 — now in its 51st year. Jim Pearce has guided it for more than a decade, and his approach is the same whether he’s picking stocks or watching alligators: patience first, conviction when the moment arrives. His latest briefing makes the case for which businesses are lying in wait — and worth owning before they move. Read it here →

I wrestled with an alligator last week. I didn’t intend to, but the crew hired to relocate the beast from a retention pond across the street from my house needed some help lifting it into their truck due to its immense size.

Fortunately, we were able to get it secured without any of us (including the gator) getting hurt. Thirty minutes later, it was deposited inside a nature park where it can live out the rest of its days without human intervention.

I learned a valuable lesson that day. Luring an alligator out of the water is easy, but picking one up off the ground is hard. That’s because they save their energy until it is time to strike. Then, they go from being nearly inert to a snarling bundle of teeth, claws, and tail.

It occurred to me that investing can be that way. The stock market will drift sideways for weeks or months, then suddenly shoot up or fall sharply with very little notice.

The same is true for individual stocks, although usually there is a discernible triggering event. It could be a quarterly earnings report that catches Wall Street by surprise, or an exogenous event that disrupts the global financial markets.

I believe the second half of this year will be more volatile than usual for the stock market:

• The war in Iran could soon end, or it may escalate into a regional conflict.
• The Fed could raise its policy rate to combat inflation, or it may reduce rates to encourage consumer spending.
• Also, the midterm elections in November will add an extra layer of stress to an already tense political environment.

Alligator Stocks

To that end, I have compiled a short list of “alligator stocks” that could move strongly one way or the other before the end of this year. I’m not sure when they might spring back to life, but each one of them has been lying low waiting for the time to strike.

The Wendy’s Company

Fast food restaurant chain The Wendy’s Company (NSDQ: WEN) has been one of the poorest-performing stocks over the past five years. It has lost more than 60 percent of its value over that span, while the S&P 500 Index has gained 75 percent.

The reasons for Wendy’s anemic performance are well known. Its stores are in desperate need of a makeover, the food menu is mundane, and it still hasn’t figured out how to compete effectively for breakfast business.

As a result, short interest in WEN has soared to more than 40 percent of its float. That means a lot of smart people on Wall Street think the company is doomed to go under soon.

They may turn out to be right, but not if billionaire investor Nelson Peltz has his way. Peltz, who is also a board member of Wendy’s, is reportedly putting together an offer to take the company private.

If that happens, then it may trigger a bidding war for the company. That would cause a lot of short sellers to close out their positions at the same time, inducing a short squeeze at which time this alligator may suddenly come to life.

The Gap

Another well-known brand that has underperformed the overall stock market is clothing retailer The Gap (NYSE: GAP). It is down 21 percent this year, with all of that decline occurring after the start of the war in Iran.

Last week, Wall Street investment banking firm Jeffries downgraded The Gap to a ‘hold’ due to the deteriorating performance of its Old Navy brand of stores. When the company released its fiscal 2026 Q1 results three months ago, it noted that comparable sales at its Old Navy stores grew by only 1 percent on a year-over-year basis compared to a 10 percent sales increase at Gap locations.

The company’s CEO, Richard Dickson, engaged in some word salad to describe those mixed results: “Gap brand delivered a standout quarter with a double-digit comp, marking one of the brand’s strongest performances in over two decades. Performance across our other brands was varied, reflecting both the different stages of their transformation and some brand-specific dynamics.”

In addition to that mixed result, the company reduced its guidance for net sales this year. At the same time, its outlook for net sales during the second quarter was reduced to “flat to down 1% year-over-year.”

We will soon know if that dour prediction is accurate. The Gap is scheduled to release its Q2 results on August 27, at which time the company may surprise Wall Street with better than expected numbers. If so, then it could shoot up to the $25 share price it was trading at before the release of the Q1 results.

Nike

Until five years ago, athletic apparel marketer Nike (NYSE: NKE) had been an unmitigated success story. Since its IPO in 1980 to its all-time high share price in 2021, NKE delivered a total return (share price appreciation plus dividends paid) of more than 121,000 percent. But during the past year, it has lost nearly half of its value.

The reasons for Nike’s fall from grace are many and varied. They include supply chain disruptions caused by the coronavirus pandemic and stiff import tariffs last year on its goods manufactured overseas.

There is some good news as far as that goes. Nike will receive $986 million in tariff refunds this year after the Supreme Court ruled most of those tariffs to be illegal.

Although Nike reported slightly lower revenues during its fiscal 2026 fourth quarter, the company is expecting better results going forward. The company’s CFO, Matthew Friend, noted: “We are improving the health of our business, managing our product portfolio and investing in marketplace elevation, while adjusting our operating costs for greater efficiency over time.”

Now, the company must prove that it can deliver on that promise. If it does, Nike could quickly get back in the race.

The same patience it takes to spot an alligator before it moves is what good investing requires. I’ve been making these calls at Personal Finance for more than a decade — and the discipline is the same in every market: wait for the setup, don’t force the trade, and own the companies with the underlying strength to snap back when conditions shift. The ones I’m focused on right now aren’t the familiar names in today’s article. I lay out the full framework in my latest briefing: The AI Margin Rotation →.