Best Stocks Switch Places With the Worst

L'Opinion - - The Wall Street & I'Opinion - James Ma­ckin­tosh

The pillars of this year’s stock ral­ly crum­bled in the past week, even as the ove­rall mar­ket had on­ly a mild de­cline thanks to sup­port from what had been among the most-ha­ted com­pa­nies.

Be­neath the small fall of 1.5 % was a near-per­fect re­ver­sal, with the pe­di­gree per­for­mers tur­ning in­to mar­ket mon­grels and ma­ny of the year’s worst stocks back in fa­vor.

The lea­ding examples are dra­ma­tic: Ge­ne­ral Elec­tric was the best stock in the S&P 500 to own over the past week – and the 496th per­for­mer for the year up to that point. Ad­van­ced Mi­cro De­vices, Abio­med and Net­flix were by far the shares to hold this year un­til last week, and since then all have lost mo­ney, ran­king 393rd, 481st and 443rd in the in­dex.

The re­ver­sal was mar­ket­wide. Grou­ped in­to de­ciles of rough­ly 50 stocks (there are 505 stocks in the in­apt­ly na­med in­dex) or­de­red by their per­for­mance over the past week it is clear that the best per­for­mers were pre­vious­ly the worst, and the worst per­for­mers were pre­vious­ly among the best.

The pat­tern isn’t so clear when sor­ted the other way round. The best per­for­mers for the year so far did be­come the worst: The top 50 stocks on ave­rage made 51 % up to Wed­nes­day last week and lost 3.7 % since then. But plen­ty of stocks that had a ter­rible time this year car­ried on being aw­ful in the past week, too. The bot­tom 50 stocks on ave­rage fell 27 % for the year to last Wed­nes­day, be­fore lo­sing ano­ther 2.4 % since, to make them the se­cond-worst de­cile.

I’m ho­pe­ful that the re­ver­sal will see a re­sur­gence of cheap va­lue stocks pre­vious­ly aban­do­ned by in­ves­tors, mi­ti­ga­ting losses among the fa­shio­nable FANGs and other tech­no­lo­gy dis­rup­ters. But for now va­lue stocks are al­so down, just by less than the high­flying growth stocks.


A tra­der watches his screens on the floor of the New York Stock Ex­change, on Oc­to­ber 10, 2018.

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