The best and worst US performers pre and post pandemic

It has already been quite a year for the S&P 500; almost six months into 2022 it is now teetering on the edge of a bear market and this month delivered it its worst day since the pandemic sell off.

Investors have endured a bumpy ride, and the days when making money seemed simple are gone, at least for the time being. Investors have been reassessing their portfolios, divesting companies where valuations have soared to untenable levels, rotating out of growth into more defensive positions and facing tough choices as inflation tears into margins.

S&P 500 on the brink of a bear market

Source:Refinitiv

Investors have endured a bumpy ride, and the days when making money seemed simple are gone, at least for the time being.

While markets are by their nature forward facing, looking back can provide investors with a valuable perspective. Which stocks have fallen out of favour, and why, and how do they differ from market movements before Covid struck?

Energy bounces back

It won’t come as a surprise to anyone who has been keeping an eye on geopolitical events that oil and gas companies occupy all the top five positions of S&P 500 upward movers of the last six months.

The soaring price of energy and rush to up production in the US, to provide security of supply to its allies and reap the benefits domestically, has switched investor opinion on these stocks. Between them they’ve racked up a 360% share price surge.

Three years ago, these businesses were falling out of favour as markets considered how meeting climate targets would impact future growth, a factor that does need taking into consideration long term.

S&P Top 5 Winners and losers

Source:Sharepad

The sell-off could be viewed through the lens of panic, as investors jump off the growth stock bandwagon

Future growth didn’t seem to be a problem for Netflix (NFLX:NASDAQ) in 2019 but the streaming giant is facing an entirely different landscape in 2022. Battered by increased competition and cost-of-living pressures, subscriber numbers dropped in the first quarter of the year for the first time in its history and its share price has tumbled in response, down a staggering 70%, surrendering the gains it amassed during streaming’s moment in the sun through lockdown.

Panic hits Netflix

The sell-off could be viewed through the lens of panic, as investors jump off the growth stock bandwagon. But Netflix has bigger problems than a one-off fall in subscriber numbers. The whole subscription model needs tweaking if these businesses are going to be long-term revenue generators.

Right now, streamers are ploughing vast sums of cash into content, a merry-go-round with no off switch. Back catalogues are fine, but they don’t deliver an appointment to view, and without the diversification enjoyed by its competition Netflix is vulnerable.

Another name ringing alarm bells from the bottom ranks of S&P 500 losers is Under Armour (UAA:NYSE). The sportswear giant disappointed with its quarterly earnings report, and news that its CEO Patrik Frisk is stepping down has rattled investors further.

The outgoing CEO was seen as a safe pair of hands who prodded the business into a more streamlined enterprise and hammered down debt levels, but under his management the business seemed to lack some of the ‘Va Va Voom’ which had set the brand apart from the competition.

Whoever takes over faces a tough job. Lockdowns in China have stalled momentum in the lucrative Asian market, and inflationary concerns will make some people think twice about splurging on fancy work-out gear. That said, the post-pandemic trend for healthier lifestyles isn’t going anywhere.

There’s no getting away from the fact that consumer uncertainty will dampen demand

Other names on the loser list

The other companies enjoying the dubious pleasure of making the loser list perhaps present more intriguing opportunities for bargain hunters particularly the makers of orthodontic favourite ‘Invisalign’.

There’s no getting away from the fact that consumer uncertainty will dampen demand for Align Technologies (ALGN:NASDAQ) dental tool. However, the tech developed by the company can help kids find their smiles without the kind of intervention traditional braces require. The company has an unassailable position in a market ripe for mega-growth once the cost-of-living crisis works its way through.

Food for thought

Looking at the first five months of 2019 Elon Musk’s Tesla (TSLA:NASDAQ) was bottom of the pack, down almost 40%.

Best and worst S&P 500 performers H1 2019

Source: Sharepad

Between 19 May 2019 and the start of this year’s tech meltdown the stock jumped an incredible 2,400%.

It’s not had the best start to 2022 but that’s arguably got more to do with its boss’s Twitter (TWTR:NYSE) fetish than the electric car business itself. Kraft Heinz (KHC:NASDAQ) was also among those out of favour, though its pricing power is sought after right now whilst Chipotle Mexican Grill (CMG:NYSE) was racking up devotees two years ago before lockdowns and inflation were everyday talking points.

Past performance is not a guide to future performance and some investments need to be held for the long term.