Right now, a lot of investors are understandably
frustrated with the stock market. Many high-quality stocks
have lagged behind the market's overall gains over the past
six months. Meanwhile,
"junky" companieshave seen their share prices skyrocket
over the same period.
At first glance, that may seem colossally unfair. Yet if
you step back and take a look at it from a broader
perspective, you'll realize that everything is working out
the way it should.
An unfair rally
To get a sense of just how pervasive this phenomenon
was, I took advantage of our
Motley Fool CAPSscreener to help do some simple analysis.
Going back six months to March 9, the low point of the bear
market, I examined some of the
lowest-rated stocksto see how they performed. To make
sure that the stocks I tracked had enough of a following on
CAPS for the rating to make sense, I only selected stocks
with 250 or more active picks.
When I did this search yesterday, I came up with 136
stocks, many of which have gained 50% or more since March.
Here's a small sample:
Stock
# of Active Picks
6-Month Return
Vonage Holdings
1,513
284%
Capital One Financial (NYSE: COF)
1,224
307%
Hovnanian Enterprises
1,034
571%
Fifth Third Bancorp (Nasdaq:
FITB)
932
663%
Krispy Kreme Doughnuts
728
208%
Source: Motley Fool CAPS.
As a comparison, I also looked at top-rated stocks on CAPS
since March 9. Out of the 152 stocks I found that had at
least 1,000 active picks, you can find quite a few that have
lagged well behind the market's 50% return. Here are some of
the laggards:
Stock
# of Active Picks
6-Month Return
Johnson & Johnson (NYSE: JNJ)
12,289
32%
Altria (NYSE: MO)
8,176 Continued... |