SummaryWith the S&P 500 making new highs, this article examines the companies trading at material discounts from their 52-week high.\n Forty-nine companies are down more than 25% from their recent 1-year high.\n This article also examines some trends within this laggard list to examine broader market implications.\n
With the S&P 500 (VOO) recently hitting new all-time highs, it is a prudent exercise for investors to look at what companies might be missing the broad market rally to screen for potential opportunities. Yesterday's article entitled, Value's Value Today, explored whether Value stocks might be poised for market-beating performance after lagging the market in recent years. In this article, I wanted to frame the companies still trading meaningfully below their 52-week highs as the broad market index sets new records.
The graph below shows the distribution of S&P 500 constituents relative to their 52 week highs. The companies at the left of the distribution are 30%, 40%, 50% from their 52-week high. The companies at the right of the distribution are approaching their trailing 1-year high.
After a few minutes of drawing my finger across the distribution, I put the breakdown in a more consumable tabular form. To read the table below, there are 49 companies down at least 25% from their 52 week high. Similarly, there are 120 companies down at least 15% from their recent high.
I do not have a historical data series that indicates whether 77 companies in "bear market territory" more than 20% from their recent highs is outsized when the market is at a new high. With the cap-weighted index outperforming the equal-weighted index on the year, it is not surprising that there is a meaningful tail of laggards.
Below I have tabled the 49 companies that have shed at least a quarter of their value from their recent highs.
Drilling down into the 49 companies down at least 25% from their 52 week high, some themes emerge.
- 15 of the 49 companies on the list were in the Energy sector, representing nearly one-third of the current market value of these laggards. Energy companies were more than 7x more represented on this list in capitalization terms than their 4.4% weight in the S&P 500. Remember that oil prices are up on the year, highlighting the secular pressures facing the industry and potentially the market disfavor of fossil fuel companies.
- Brick-and-mortar retailers also featured prominently on the list with Macy's (M), L Brands (LB), Gap (GPS), Nordstom (JWN), Tapestry (TPR), Under Armour (UA), Ulta Beauty (ULTA), Kohl's (KSS), and PVH Corp (PVH) on this list. Macerich (MAC), the mall operator, was the lone company in the Real Estate sector on the list.
- Altria (MO) is the largest company on the list by market cap. The potential regulatory clampdown on Juul, of which Altria owns 35%, has pressured the share price recently. The company offers the highest dividend yield on the list, excluding a pair of aforementioned retail-related stocks.
- The second largest company on the list is Walgreen's (WBA), despite the stock's recent pop from takeover chatter. If this is the latter stages of the business cycle as some have surmised, leveraged buyouts have been notably absent. Expect a wave of LBO rumors to wash over markets if the Walgreen's takeover talk increases. At a $55B market capitalization with $16B of debt already on the balance sheet, we would be talking about a historically large leveraging transaction for a business model under some degree of flux. If a Walgreen's transaction can get done, there are other large deals out there. Expect some idiosyncratic pops of companies that screen well for a leveraging transaction.
- At 13% of the index, Financials are the third largest sector in the S&P 500, but notably no Fins were on the laggards list. Financials are heavily represented in Value indices, but there are currently no constituents more than 25% from their 52-week high.
- The same can be said for Utilities - no current constituents are on this laggards list - but only after Pacific Gas & Electric (PCG) was booted from the index in January.
I hope this article provides readers a unique look at the companies lagging the broad market as it hits new highs.
Disclaimer: My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.
Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
- 实体零售商也在榜单上占据重要位置，梅西百货(Macy‘s)、L Brands(LB)、Gap(GPS)、Nordstom(JWN)、Tapestry(TPR)、Under Armour(UA)、Ulta Beauty(ULTA)、Kohl’s(KSS)和PVH Corp(PVH)都在榜单上。商场运营商Macerich(MAC)是榜单上房地产行业的唯一一家公司。
- 奥驰亚(MO)是榜单上市值最大的公司。奥驰亚持有JUUL 35%股份的潜在监管打击，最近对其股价构成了压力。除上述两只零售相关股票外，该公司提供了名单上最高的股息收益率。