S&P 500: Investors bundle on 10 stocks others panicked sold (like Tesla)

What has been one of the easiest ways to make big money on stocks this year? Get stocks in and out of the S&P 500 that other investors left for dead in 2022.

X

Ten stocks, including S&P 500 superstar stocks Metaplatforms (META) and You’re here (TSLA), has climbed 60% or more this year after tumbling that much or more in 2022, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. They are among the biggest gainers this year, with the S&P 500 itself up 18%.

The rapid rise in the fortunes of some of the biggest losers just a year ago dramatically shows how investors have gone from fear to greed as the S&P 500 climbs. Investors buy almost anything that has a stock symbol.

“With the market rising faster than the temperature this summer, we can’t say we were surprised this morning to see that retail investor sentiment as measured by the American Association of Individual Investors (AAII) has turned bullish,” Bespoke Investment Group said. “In this week’s survey, the percentage of optimistic respondents rose from 41% to 51.4%, which is the highest level since April 2021.”

Other investors’ trash is now treasure

It’s remarkable how quickly investors’ opinions on such a wide range of stocks have changed so quickly. And these are not just a few high-profile cases.

Shares of the 46 stocks in the S&P 500, S&P Smallcap 600 and S&P MidCap 400 indices that plunged 60% or more in 2022 have gained an average of 32% this year. That’s about double the rise of the S&P 500 this year.

The most dramatic example of a reversal is Arlo Technology (ARLO), a manufacturer of online security and video surveillance systems. Shares of the company have fallen more than 66% in 2022. Investors have grown weary of the stock’s perpetual money losses. It had lost money every year from 2019 to 2022.

But this year, it’s one of the hottest stocks. Shares are up more than 206% this year so far to 10.74 apiece, more than rewarding investors who spotted the turnaround. And there are profits to support stock market enthusiasm. Analysts believe the company will earn about $19 million this year on an adjusted basis, or 21 cents per share.

Big losers turn into huge winners

Meta Platforms, the company that operates Facebook, is perhaps the greatest example of going from a hated stock to a beloved stock.

Shares plunged more than 60% last year as investors resisted the company’s heavy spending on virtual reality plans losing money. Consumers didn’t want the helmets the company was selling. And during the distraction, rivals like TikTok have been gaining market share in the now lucrative social media market. Meta even dropped lists of the 10 most valuable companies in the S&P 500.

But all that changed in 2023 – and fast. CEO Mark Zuckerberg has stepped up his social media efforts, including launching a Twitter rival called Threads. Shares of the company have risen more than 151% this year, helping it reclaim its place among the so-called Magnificent Seven stocks.

Similarly, Tesla shares are booming. The electric vehicle maker’s stock rose more than 113% this year to 262.9, mainly on optimism about its charging network and electric truck. And that gain is a big reason ARK Innovation’s (ARKK) Cathie Wood is back at the top of all U.S. diversified ETFs this year.

Sophisticated investors know it’s best to focus on the top stocks to maximize long-term returns. But for now, picking up panic sells from other investors is proving to be a good way to make some quick cash.

Rise from the ashes of 2022

S&P 1500 stocks are up 60% or more this year after falling as much or more in 2022

Sources: S&P Global Market Intelligence, IBD

Follow Matt Krantz on Twitter @mattkrantz