Time to Double Down on these “Dogs”?
I kiss my dog more than I kiss my wife.
Now, you might think that makes me a terrible husband.
But actually, I’m just a really great, attentive dog parent.
And look, my dog jumps into my lap, gives me “puppy dog eyes,” and demands smooches multiple times per day. If my wife did that, she might get even more lip action than she already does.
So, we’ve established I’m a fan of dogs.
And I’ve even dubbed 2023 the “Year of the Dog.”
Though, not because my little canine princess demanded that I do so in some “Son of Sam” fashion.
It’s because this is the year when those “dogs” of 2022 - the worst performing stocks on the S&P 500 - have gotten off leash and are sprinting away.
But that’s to be expected. And I’ll explain why…
Every Dog Has its Day
If you’ve been a long-time reader of mine, either here at First Bar or any of the other publications I’ve written for, you know I’m not only a fan of pooches, I’m also a fan of “dog” stocks.
I love targeting good companies whose share prices have been hammered and are underperforming the market. I watch these closely, looking for an opportunity for a rebound.
Because they almost always do.
Now, here’s where it gets exciting … during bear markets, like we had in 2022, plenty of stellar companies see their share prices crushed. That leads to a cornucopia of rebound opportunities.
And we’re already seeing this approach pay off.
In fact, the 25 worst-performing S&P 500 components in 2022 are up an average of 16.95% so far this year. And 11 of those 25 companies are up 20% or more!
For comparison, the S&P is up a mere 3.9% year-to-date. So, these “dogs” of 2022 are outperforming the index by a wide margin.
Take for instance, Tesla (TSLA). It was one of the worst-performing S&P components last year. Shares careened 67.8% lower.
Nearly three months into 2023, it’s a completely different story. And I’m shocked CEO Elon Musk hasn’t tweeted about it (or maybe he has). Year-to-date, shares of the EV maker have charged 67% higher!
Meta Platforms (META) was a real stinker in 2022 as even its own engineers refused to use the flailing Metaverse. Losses piled up as it decided to simply set fire to piles of cash.
But wooden-boy-brought-to-life Mark Zuckerberg is laughing at his dissenters in 2023. Shares of Meta are up more than 38.5%!
Warner Bros. Discovery (WBD) was a stock everyone rushed to call dead in 2022. Shares tanked 60% as ad sales slumped, restructuring charges mounted, and the ongoing pandemic kept butts out of seats in theaters.
But look who’s alive and kicking, even though Black Adam wasn’t the homerun they hoped for. Warner Bros. Discovery shares are up 59.5% year-to-date!
There’s a knee-jerk reaction to write-off poor performers of the year before. But don’t. They’re often the gems of the new year, offering growth at a value. Those are two things every investor’s portfolio needs right now.
So, don’t be afraid to double-down on those beaten-down stocks of 2022.
The lesson here, ignore the “dogs” (or your spouse or life partner for that matter) at your own peril. Show those undervalued opportunities some love. And they’ll more than likely pay you back with big rewards, particularly in this “Year of the Dog.”
Mushing ahead,
Matthew
Morning Movers:
Nvidia (NVDA) – Shares are up 12.2% on an earnings beat fueled by AI. As I outlined yesterday, the expected move on earnings was +/-6.6%. Though, I did point out that shares have tumbled an average of 7.89% on the last two fourth quarter reports.
Etsy (ETSY) – Shares initially jumped on earnings. But they are currently down 1.7%, despite a beat. I outlined yesterday that the expected move on earnings was +/-9.5%. And that shares have surged an average of 13.85% on its last two fourth quarter earnings releases. Even better, they’ve jumped more than 11.4% on five consecutive fourth quarter reports.
Alibaba (BABA) – Shares initially jumped nearly 6%. But they are currently down 2.7%. Yesterday, I outlined that the expected move on earnings was +/-5.6%. Though shares have slipped an average of 2.29% on the last two fiscal year third quarter earnings reports.
Vipshop Holdings (VIPS) – Shares are up 2.3% as earnings topped expectations. I outlined yesterday that the expected move on earnings was +/-10.8%. And that since 2012, shares of Vipshop have only fallen on fourth quarter earnings three times, averaging a one-day pop of 6.74% during that span.
Moderna (MRNA) – Shares are down 8.2% as sales came up short. I outlined yesterday that the expected move on earnings was +/-6.4%. And that shares have risen an average of 8.79% on the last two fourth quarter earnings reports.
What to Watch:
To close out the week, the focus shifts from earnings to economic data and a firing squad of Fed speak.
Thursday Earnings After the Closing Bell:
Autodesk (ADSK) – expected move on earnings +/-5.2%. Wall Street expects to see revenue grow 8% to $1.31 billion with earnings of $1.81 per share. Shares have slipped an average of 1.1% on the last two fourth quarter reports. But tech has been doing well this earnings season.
Block (SQ) – expected move on earnings +/-8.5%. Analysts are looking for $4.6 billion in revenue with earnings of $0.30 per share. Shares have surged an average of 16.8% on its last two fourth quarter earnings releases.
Friday Earnings Before the Market Opens:
Gray Television (GTN) – expected move on earnings +/-9.2%. Wall Street wants to see revenue of $1.04 billion with earnings of $1.78 per share. Shares have split the last two fourth quarter reports, gaining an average of 1.5%. But shares have been hammered the last three consecutive reports on ad sales issues.
8:30 AM ET – Consumer spending (est. 1.4%)
8:30 AM ET – Core PCE (est. 0.5%)
10:00 AM ET – Consumer sentiment (est. 66.4)
10:15 AM ET – Fed Governor Philip Jefferson speaks.
10:15 AM ET – St. Louis Fed President James Bullard speaks.
1:30 PM ET – Boston Fed Susan Collins speaks.
1:30 PM ET – Fed Governor Christopher Waller speaks.
© 2023 Matthew Carr
All rights reserved.
This market commentary is opinion and for entertainment purposes only. The views and insights shared by the author are based on his many years of experience covering the markets. But nothing in this email should be considered personalized investment advice. Investments should be made after consulting your financial advisor and after reviewing the financial statements of the company or companies in question.