Right about now is when they start picking through the trash.
As the Taxpayer Rally marches on, there is a huge temptation for managers to go “dumpster diving” for stocks that have underperformed. I think we’re approaching that point right here with the S&P 500 sporting a year-to-date gain of 16.5% (and a much bigger one off the lows).
Market participants who have either sat this rally out from the sidelines or who are still chasing their benchmarks are scared to death that the 3rd quarter’s end is in sight. The temptation to chase is understandable if you’re running a mutual fund in Boston and you live and die by your “peer group” ranking.
One well-known method these nervous nellies may use to play catch-up is the time-dishonored tradition of dumpster diving. When you can’t rationalize buying a Joy Global (JOYG) up 85% or a Wynn Resorts (WYNN) up 400%, the question becomes, “Are there any stocks that haven’t moved yet?”
I neither endorse nor disapprove of any investment strategies here on this site, my commentary here is simply an observation that this type of stuff occurs when a surprise rally shocks almost everyone and lasts longer than many thought possible. Any of these stocks may bounce or continue to disappoint, their inclsuion in the bottom performing group has no bearing whatsoever on their future performance.
The fact that they can be seen as being cheap on the basis of year-to-date performance alone is downright silly, of course, but that will not deter the desperate. The fact that they’ve not kept up this year is merely a convenient rationalization.
The graphic above is a list of the 25 worst performing S&P 500 stocks year-to-date through September 15th. These names also might be the short list of many a chasing stockpicker as September draws to a close.
I wouldn’t be surprised if the “deep value” guys are holding their noses and combing through this pile as we speak.
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