I'm a particular fan of three companies with stocks that have under performed of late. I believe the year 2020 will be better for them than for most stocks, many of which have risen to a point where the risk of decline for any perceived shortcoming is considerably higher. I think these three companies’ stocks have already “written in” disappointment. Any favorable surprise now is likely to elicit a favorable out-sized response. Here's my first of three:

Fallen Angel #1: IBM (IBM)

I can hear the groans now! “IBM? That is old tech. The world has passed them by. They are now doomed to be a perennial under-performer.”

Well, yeah. That's sort of the definition of a Fallen Angel. When most people feel that way, they do not buy the stock and it languishes. So, in the very “uppity” year of 2019, IBM roared back from the huge Q4 2018 decline for a month, but then stalled. Today it's no higher than its closing price on Jan. 30, 2019.

SOURCE: Fidelity.com

Yet IBM is not your father’s Oldsmobile. It's a much leaner company than ever before. Widely panned for over paying, in many analysts’ opinions, for Red Hat, that purchase allowed IBM to catapult into becoming a leading player in platform as a service, infrastructure as a service, and software as a service.

IBM still trails Amazon (AMZN) and Microsoft (MSFT) as cloud purveyors, but I believe it has the deep pockets to prevail in the current slugfest for the No. 3 position among Salesforce (CRM), Alphabet (GOOG) (NASDAQ:GOOGL), and Oracle (ORCL). There's plenty of business to go around in this key area, though I imagine we will see it consolidated among three top players and many others at the fringes going forward.

Where IBM really shines is in the surprises they can deliver. They are neck-and-neck with Accenture (ACN) in both the consulting and outsourcing arenas. They are not only No. 1 in global artificial intelligence research, application, and revenue, they are beginning to pull even further ahead of the pack. Their willingness to share research with other firms and with the best and the brightest in universities around the world provides an open-source relationship, yet they are the ones with the resources to make the partnerships profitable.

Some of these initiatives take a great deal of time to come to fruition, so you don’t see page 1 headlines. But as they progress in their research and development sometimes, pow!, one day they are able to announce another major breakthrough. If I had to guess I imagine the next one of these pleasant surprises might come in the field of quantum computing, rendering our current experience in computing look like yesterday’s news.

Or perhaps it will seem to come from left field, maybe in the area of battery technologies. IBM’s recent announcement that it has created a battery design that uses materials extracted from seawater will hold the key to cheaper and more environmentally (and politically) safe battery production.

Right now lithium-ion batteries require cobalt. Cobalt is mostly found in the Democratic Republic of the Congo. Until this year the DRC has never had a peaceful transition to power. We’ll see how long this lasts. While the DRC probably has more valuable natural resources than any other nation, the country has not yet found a way to share the wealth that comes from extracting its resources among its own citizens.

IBM says its technology has proven to outperform lithium-ion batteries in cost, in providing less charging time and in energy efficiency. What an amazing and timely breakthrough that would be if proven feasible on a global scale.

Finally, we are paid to be patient. IBM currently pays a well-covered $6.48 annual dividend, resulting in a yield of 4.8%.

Read Part 2: My 'Fallen Angels' Favorites For 2020 Part 2: Kraft Heinz