By Jacob Sonenshine
Out of all recent losers this market has seen, many have come back to life. Select ones look appealing.
The S&P 500 is up roughly 9% this year, but that's largely driven by semiconductor makers and other manufacturers benefitting from exploding demand for chips, components, and heavy equipment as Big Tech services companies build artificial-intelligence data centers. Look outside the data center, and you will find 235 stocks in the S&P 500 that have fallen year to date as of Thursday just after the open, according to FactSet.
Many consumer discretionary companies are confronting higher costs emanating from the oil-price shock. Not all of these companies can fully offset the costs with higher selling prices.
Consumer staples have performed fine as a group, but the sector contains a host of declining food makers that are struggling to compete with healthier products. Elsewhere, companies focused on software and business services have endured losses resulting from the market's concerns that OpenAI and Anthropic will steal some business.
Financials are dealing with concerns about consumers and business credit in the face of what has become a mild economic headwind from higher oil prices.
The silver lining: While some of these these fallen stocks will emerge losers, some will turn out to be winners. A subset of them that had dipped below their 200-day moving averages have recently reclaimed those levels. That's always a positive, as it indicates a greater probability that their businesses will prove viable in the long term.
"We love to see stocks capture the 200-day moving averages," said Ken Mahoney of Mahoney Asset Management, which has recently added to positions in select names.
So we screened for stocks that have recaptured their 200-day moving averages this year or late last year, and we found 25 names.
To find the most promising of the 25, we looked at only those that are not packaged-food companies, have not yet touched new record highs (and thus appear to have more room to recover losses), and have seen analysts' 2026 sales estimates rise, or fall no more than 2%. The average S&P 500 company has seen sales estimates increase 2.6% this year, so identifying companies that are roughly in step with or better than the average increases the likelihood of avoiding truly deteriorating businesses.
Those criteria whittled the list down to 14 names: Altria, Colgate-Palmolive, Eli Lilly, Pfizer, Edward Lifesciences, Align Technology, West Pharmaceutical Services, Quest Diagnostics, California utility PG&E, JD.com, Air Products & Chemicals, and fellow chemical makers LyondellBasell Industries, CF Industries, and Corteva. These are all companies that, for some of the reasons mentioned above, have fallen out of favor, trade more cheaply, are proving to still have healthy businesses, and still have room to rally.
One of the better strategies for gaining exposure to these stocks its to buy all 14 in fairly equal amounts. Owning at least many of them enables an investor to be diversified within this type of compelling idea, mitigating the risk that one of them could disappoint and destroy an investor's portfolio.
Give these a shot.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 14, 2026 14:22 ET (18:22 GMT)
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