A ‘Buy the Loser’ Rally

July 21, 2008

Hickey and Walters (Bespoke) submit:

If you didn’t own the dregs of the S&P 500 going into the rally that started last Wednesday, chances are you have underperformed over the last few days.

We broke the S&P 500 into deciles (50 stocks in each decile) based on stock performance from the 5/19 high to the 7/15 low and calculated the average performance of stocks in each decile since the 7/15 low. The average stock in the S&P 500 has risen 6.44% since then. The 50 stocks that were down the most from 5/19-7/15 are up 26.4%. Conversely, the 50 stocks that held up the best during the recent market declines are only up an average of 0.99%.

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