Is it time to buy the 4 worst-performing March stocks in the S&P 500? | Smart Switch: Personal Finance

(James Brunley)

If you’re a fan of buying stocks while they’re on sale, there’s certainly no shortage of those names right now. Although the S&P 500 (SNPINDEX: ^GSPC) it appears to be in recovery mode after the stumble in February, many of its components are yet to be recovered. In some cases, they are still slipping down.

However, before you jump on one of these stocks simply because it’s down by double-digit percentages, you may want to step back and assess the full picture. Sometimes liquidations are mistakes. This time, however, investors appear to be making calculated and reasonable decisions.

Image source: Getty Images.

What went wrong for these four stocks?

Etsy (NASDAQ: ETSY), Whirlwind (New York Stock Exchange: WHR)builder Pulte Group (New York Stock Exchange: PHM)and Hasbro (NASDAQ: HAS) they are the biggest losers in the March S&P 500, down 20%, 14%, 16% and 15%, respectively. For comparison, the index itself was up just over 3% in March.

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Most of the time there is a clear common thread among the worst laggards in the market. Not this time, however.

Actions of electronic commerce the Etsy platform, for example, initially soared in March in response to encouraging quarterly numbers released in late February. However, after thinking about it for a few days, investors began to worry that their plans to increase selling fees could do more harm than good. Toymaker Hasbro’s share price has slipped in the wake of a war of words it is waging with activist investment group Alta Fox, which calls for (among other things) a reshuffle of the company’s board of directors and a spin-off of his Wizards of the Coast unit. . Although initially applauded by shareholders, that issue has become contentious, adding to the shock of the Russian invasion of Ukraine. Shares of PulteGroup, perhaps better known as Pulte Home Builders, slumped largely in response to waning interest in home buying. The pending fall in February home sales marks the fourth straight month that the National Association of Realtors’ measure has contracted. And the hydromassage? There’s really no directly discernible reason why Whirlpool collapsed in March, though it’s safe to say that geopolitical unrest in Ukraine had something to do with it.

It’s a curious collection of mishaps. As noted, there is no clear common theme. That’s why potential buyers should be concerned.

Not all weaknesses are the same

Trying to time the market is a notoriously bad idea. Most people just can’t get it right, mostly because they weren’t meant to.

However, there is a difference between simply overlooking buying a battered stock and paying attention to what the market is telling you about a company. In all four cases discussed above, investors’ concerns are perfectly reasonable. It’s not clear how many Etsy sellers will balk at higher listing fees. It’s not clear if Hasbro will be better off or simply distracted by Alta Fox’s new involvement. And, with interest rates finally rising and the economy itself under threat, it’s not clear that demand for new homes won’t weaken.

This rationalization is different from the environment we found ourselves in in January, when stocks really started to tumble. Then, the omicron variant of the coronavirus was just beginning to spread, leading investors to jump to conclusions about more temporary shutdowns that mostly didn’t end up happening.

The market response to the Russian invasion of Ukraine in February also raised fears that have since turned less serious. While the events that have unfolded there have been disturbing, the matter has been largely contained within Ukraine. It does not appear that Vladimir Putin has any real interest in stepping up his actions, at least not yet. There is still long-term uncertainty here, as oil prices remain elevated, select other commodities are quite volatile, and some supply chains are further hampered by turmoil, exacerbating existing problems rather than alleviating them.

However, the four sell-offs focused on above aren’t rooted in what will turn out to be relatively short-lived problems. The market is thinking about these sales and sees that they can be cyclical and/or fundamental challenges that are unique to each company.

Keep your finger on the true pulse of the market

None of this suggests that buying any or all of these stocks guarantees disastrous results. And, if you already own any of them, this isn’t necessarily a call to sell them. Every business may face a tough 2022, but each will survive their current challenges. Stocks have already taken their bumps, so to speak.

He suggests that you should emphasize differentiating between market-wide panic selling and company-specific rationalized selling. The former is often short-lived. The latter is often a warning of something more lasting. Most of last month’s weakness for these stocks reflects the latest here.

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james brumley has no position in any of the mentioned stocks. The Motley Fool owns and recommends Etsy. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.

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