The Worst Have Been the Best

Since the Russell 1,000 bottomed on November 26th, the average stock in the index is up 7.29%.  We broke the index into deciles (10 groups of 100 stocks) based on their performance during the market's correction from 10/9 to 11/26 to see how stocks that performed the best and worst during the declines are performing during the current rally.  As shown in the chart below, the results are pretty clear.  The decile of the worst performing stocks during the correction is up the most during the rally, with an average performance of 11.24%.  The second worst decile is up the second most, the third worst decile is up the third most, and so on and so on.  Investors have clearly been doing some bottom fishing throughout the rally.

Below we highlight the 20 best performing stocks in the Russell 1,000 since the 11/26 bottom.  As shown, FRE is up the most at 51%, but it was down 61% from 10/9 to 11/26.  Only two stocks on the best performing list were up during the correction -- THC and MOS.  Other notables on the list below are CFC (up 40%), FNM (up 34%) and homebuilders CTX, RYL, DHI, TOL, LEN, NVR and PHM. 

 

Comments

[Greg Feirman]

I love this decile analysis. Doesn't this suggest investors are bottom fishing, buying the most beaten up stocks, rather than betting on a rebound in the economy? Supports the view that the recent move is more of bounce, to me.

[billb]

Looking at the stocks above that recently have had the best percentage price gains coming out of a beaten down phase, they largely appear to be ones associated with the long slide of the housing and finance sectors.

Is it generally true (during other corrections followed by rallies) that the best performers during that rally are the stocks that are long term underperformers or are they more typically overbought stocks with high relative price strength (during the previous six to twelve months) that might have suffered only recently from fear and profit taking?