Uncategorized

: Buy the worst? Here are 5 destroyed stocks for this bottom-fishing strategy


Time for some bottomfishing in this market?


Getty Images/iStockphoto

Back on the last day of 2012, an article published on Money Morning laid out the five best- and five worst-performing stocks in the S&P 500 index
SPX,
+0.01%

of the year, in an attempt to divine some insight into where to invest heading in to 2013.

The biggest winners were PulteGroup
PHM,
-2.35%
,
Sprint , Whirlpool
WHR,
-0.21%
,
Expedia
EXPE,
+0.53%

and Bank of America
BAC,
+0.37%
,
while the losers were RadioShack , SuperValu, AMD
AMD,
+0.04%
,
Best Buy
BBY,
-1.00%

and Apollo Group.

On Reddit, an investor named Spaghetto offered up a “where are they now” kind of look into which group has outperformed since then. It’s not even close. The losers win by a wide margin.

He determined that betting $1,000 on the winners would have resulted in a gain of more than 250%, bringing the total investment to $2,500. Certainly not a bad return over the course of eight years.

Investing in the worst performers, however, would have delivered about 900% growth to $9,000. AMD’s rocket ride obviously has a lot to do with that, but even after stripping that out the other four stocks still would have returned 240%, according to Spaghetto’s data dive.

What’s the takeaway?

“You shouldn’t necessarily overlook ‘bad’ stocks. Of course, do your due diligence. And definitely don’t invest all your eggs there,” he wrote. “But conversely, don’t ignore picks just because someone tells you to. It might be worthwhile to keep a few ‘bad’ eggs in a small basket of your larger portfolio. You never know what will come roaring back in five to ten years.”

In that spirit, let’s take a look at the winners and losers so far this year.

The top five performers on the S&P 500 year-to-date: Etsy
ETSY,
-2.04%

(+243%), Nvidia
NVDA,
-1.13%

(+141%), West Pharmaceutical Services
WST,
+0.23%

(+96%), PayPal
PYPL,
+0.64%

(90%) and Amazon
AMZN,
-1.97%

(85%).

The losers: Occidental Petroleum
OXY,
-4.90%

(-74%), Carnival Corp.
CCL,
+0.42%

(-72%), Norwegian Cruise Line Holdings
NCLH,
+0.62%

(-72%), Marathon Oil
MRO,
-4.68%

(-68%) and TechnipFMC PLC
FTI,
-2.68%

(-67%).

We’ll check back in 2028 and see whether the strategy holds up.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *