Large-Cap Left Behinds

Despite major US stock market indices reaching new highs, 31 large-cap S&P 500 stocks (market cap >$20B) have significantly underperformed, trading over 20% below their 52-week highs and down over 20% in the last year. This diverse group, including names like Trade Desk, Chipotle, UnitedHealth, and Adobe, collectively represents a 32% loss over the past year for an equally-weighted basket. These 'left behinds' highlight pockets of weakness within the broader bull market, potentially presenting contrarian investment opportunities despite current uncertainty regarding their bottom.

Analysis

Despite the S&P 500 reaching new highs, a significant divergence exists within the market, with 31 large-cap stocks (market cap >$20 billion) trading more than 20% below their 52-week highs and also down over 20% in the last year. This underperformance is not concentrated in a single sector but is spread across diverse industries, including communication services (TTD), consumer discretionary (CMG, TGT), energy (SLB), healthcare (UNH), and technology (ADBE). The financial impact of this weakness is substantial; an equally-weighted portfolio of these names would have registered a 32% loss over the past year. The prevailing technical picture and sentiment are strongly negative, with price charts suggesting a continued downtrend. However, the article also posits a classic contrarian dilemma, noting that such severe underperformance among established companies could present deep value opportunities, as some of these 'left behinds' are likely to rebound significantly over a one-year horizon.

Key Decisions for Investors

• Contrarian investors should conduct rigorous, bottom-up fundamental analysis on this list of 31 underperforming large-caps to identify names whose valuations may have disconnected from their long-term prospects.