Brave investors are trying to buy the S&P 500 on the dip. But they’re not even crazy enough to touch a surprisingly large number of battered stocks.
All told, 19 stocks in the S&P 1500 that crashed 40% or more from the market’s peak, including consumer discretionary American Eagle Outfitters (AEO), information technology play Digital Turbine (APPS) and S&P 500 member Bath & Body Works (BBWI) have fallen since the rest of the market began its attempt to recover, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And that’s revealing a problem with some fallen stocks. S&P 500 investors are selectively dipping back into the market. The S&P 500 is up 7.1% from its May 19 low, putting trillions of dollars back into investors’ pockets. But a large swath of fallen stocks, including some in the S&P 500, are too “damaged goods” for even the dip buyers to mess with.
“The latest mutual fund and ETF money flow data shows individual investors and small institutions finally stepped up and bought the last dip in U.S. (stocks), but not much else,” said Nicholas Colas of DataTrek Research.
Dip Buyers Emerging From S&P 500 Shadows
It’s been a rough year for all investors. But it’s been especially brutal for anyone trying to step in front of the correction and buy growth stock on the cheap. They keep getting cheaper.
But investors keep trying. During the week ended May 25, fund investors plowed more than $10 billion into U.S. stock positions, DataTrek said, citing data from Investment Company Institute. That more than reversed the $6.1 billion they yanked out of stocks in the prior week. There was a flood of $46 billion out of stocks in April and early May.
But the tentative flows into S&P 500 stocks highlight that investors are still nervous. “It does not yet signal a turn in investor confidence,” Colas said. And confidence is downright lousy for a surprisingly large number of S&P 1500 stocks.
Digital Turbine: Powering Pain
If there’s a fallen stock investors want nothing to do with, it’s Digital Turbine. Shares of the software maker for media companies collapsed nearly 58% from the S&P 500’s high in January to the May 19 low. But investors continue to steer clear, still.
The stock is down another 18% from the market’s low, despite its value getting cut in half. That means it’s now a crushing 65% below where it was when the market peaked. It turns out the company’s growth has stalled. It’s only supposed to make $1.68 a share this fiscal year, barely up from year-ago levels. It’s not until its fiscal 2024 ends, in March of that year, that analysts foresee profit growth coming back.
Investors seem to think this isn’t a stock worth waiting for.
American Eagle: Doing Wrong For Investors
Investors wouldn’t want to touch shares of teen retailer American Eagle with a 10-foot coat hanger. It’s another example of a beaten stock that can’t catch a bid.
Shares of the Pittsburgh-based retailer have plunged another 10.8% from the S&P 500’s low. That’s a bit surprising as they already lost nearly 47% of their value from the market’s high to the low. That leaves the value of American Eagle’s battered shares still cut in half from the S&P 500’s high. And the fundamentals tell you why. The company’s profit this fiscal year is seen dropping more than 44%. That’s not the kind of fundamentals to encourage a dip buyer!
Investors Avoid Bath & Body Works In S&P 500
The S&P 500 itself is catching a bid. That’s why members of the index that investors refuse to buy stick out, in a bad way. That includes soap retailer Bath & Body Works.
In a decent bounce, the S&P 500 has rallied back 7.1% from its low. True, it’s still down nearly 13% from its high. But keep in mind, the key market index had been off nearly 19% from its high to its low point.
That’s not the case for Bath & Body Works. The retailer’s shares are still down more than 43% from the S&P 500’s high. That’s because they’ve fallen an additional 2% from the market’s low, despite already plunging more than 40% from the high. And again, investors see a profit slowdown. The company’s adjusted profit per share is seen dropping nearly 10% this fiscal year.
So, yes, investors are trying to wade back into the market. But not into every corner of it.
Stocks No One Will Touch
All the following S&P 1500 stocks are lower from the S&P 500’s low, despite already falling 40% from the market high
Company Ticker Index Stock % ch. market high to low % ch. from market low Sector Digital Turbine (APPS) S&P 400 -57.6% -18.0% Information Technology American Eagle Outfitters (AEO) S&P 400 -46.9 -10.8 Consumer Discretionary Conn’s (CONN) S&P 600 -46.6 -9.4 Consumer Discretionary Community Health (CYH) S&P 600 -56.5 -9.4 Health Care Loyalty Ventures (LYLT) S&P 600 -61.8 -9.0 Communication Services Tandem Diabetes Care, (TNDM) S&P 400 -51.4 -8.0 Health Care Nektar Therapeutics (NKTR) S&P 600 -71.4 -6.4 Health Care Xencor (XNCR) S&P 600 -44.8 -6.3 Health Care Coherus BioSciences (CHRS) S&P 600 -51.8 -5.7 Health Care Enanta Pharmaceuticals (ENTA) S&P 600 -40.6 -5.7 Health Care 8×8 (EGHT) S&P 600 -54.7 -4.1 Information Technology Fulgent Genetics (FLGT) S&P 600 -40.1 -4.0 Health Care Arrowhead Pharmaceuticals (ARWR) S&P 400 -49.8 -4.0 Health Care The Children’s Place (PLCE) S&P 600 -40.1 -2.9 Consumer Discretionary Bath & Body Works (BBWI) S&P 500 -42.5 -2.0 Consumer Discretionary Heska (HSKA) S&P 600 -41.4 -1.1 Health Care LendingTree (TREE) S&P 600 -48.9 -1.1 Financials NeoGenomics (NEO) S&P 600 -75.3 -0.5 Health Care Endo International (ENDP) S&P 600 -85.0 -0.4 Health Care Sources: IBD, S&P Global Market Intelligence, S&P 500 high on Jan. 3, 2022, low on May 19, 2022 Follow Matt Krantz on Twitter @mattkrantz
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