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“Change before you’re forced to change.” – Roger Goodell
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Futures are in rally mode this morning ahead of the Non-Farm Payrolls report at 8:30, while treasury yields are at their lows for the week. The rally in US stocks follows what has been a strong morning in Europe, as well as some solid gains in Asia.
Earnings season may be mostly in the rearview mirror, but some reports are still trickling in, and last night saw a very disappointing report from Lululemon (LULU). While the athletic apparel maker reported better-than-expected earnings on inline revenues, full-year earnings guidance was slashed by 10%. While the stock was only trading at 14 times earnings heading into the report, investors are not taking kindly to the lowered guidance. In pre-market trading, shares of LULU are down roughly 20% to their lowest level since March 2020. Earlier this year, the stock was trading as high as $420. It’s at $166 now!
Taking into account this morning’s decline, LULU now ranks as the S&P 500’s worst-performing stock on a YTD basis and is one of just four stocks in the index that have lost more than half of their value. The other three are The Trade Desk (TTD), Centene (CNC), and Gartner (IT). Along with those four stocks, another 14 are down over 30%, including Deckers Outdoors (DECK), Align Technology (ALGN), and Chipotle (CMG). There was a time when these stocks were among the biggest highfliers, but nowhere is the phrase “what have you done for me lately” more applicable than in the stock market.
LULU’s decline has been painful, but it has also been part of a broader decline in athletic apparel companies. While none of them are down anywhere nearly as much as LULU, shares of Nike (NKE), Under Armour (UA), and VF Corp (VFC) are all in the red YTD. With a “workout” these days now involving nothing more than a jab in the thigh, you don’t need yoga pants and a pair of sneakers to do that!
Enough of the bad news. If we’re going to dwell on the worst-performing stocks in the market this year, we have to give equal time to the top performers, so the table below shows the 15 stocks in the S&P 500 that are up at least 50% YTD. You may think that the market is being led entirely by tech, but six sectors are represented on the list of the 15 biggest winners. Tech is tied for the lead in terms of representation, but four stocks from the Industrials sector are also represented, including GE Vernona (GEV) and General Electric (GE). As hard as it would have been to imagine a couple of years ago seeing LULU, DECK, ALGN, and CMG on the list of biggest losers, it would have been just as hard to think a stock with “GE” in its name would ever be on the biggest winners list, let alone two!
At the top of the list of biggest winners were four stocks that have already doubled this year – Palantir (PLTR), Seagate (STX), Newmont (NEM), and Western Digital (WDC). Seeing PLTR at the top of the list isn’t surprising, but STX, NEM, and WDC? Where did they come from? Goldminers aren’t exactly the sexiest stocks in the market, and when most investors think of tech stocks, STX and WDC are probably two of the last stocks that come to mind. It just goes to show that the biggest winners in the market often come from places seemingly out of the blue where the fewest investors are looking.
