The famous investor Warren Buffett is known to own S&P 500 shares forever. But two stocks in which he did not follow his own advice highlighted an important trend in this year’s market: the losers in 2020 are among the winners in 2021 so far.
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Buffett unloaded Berkshire Hathawayshares of the energy company (BRKB) Western Oil (OXY) and industrial United airlines (UAL) in the distressing second quarter of 2020. And yet, both increased in the 2021 value-oriented market. And not just a little. Occidental is the fourth best share of the S&P 500 this year, up 77%. And United rose more than 30%, placing it in the top quintile of the index.
It is easy to see why Buffett sold. Occidental was the worst stock on the S&P 500 in 2020. The fall in oil prices in 2020 caused Occidental’s shares to fall 77% in 2020. And United Airlines lost half of its value in 2020, becoming the fifth worst action on the S&P 500.
But in the 2021 stock price rally, where last year’s worst stocks are skyrocketing, both stocks are coming to life for investors looking for the right indicators now.
The S&P 500 is upside down
Buffett is feeling the big turn of the S&P 500 in his wallet. The worst stocks in the index are turning out to be the best so far in 2021. The numbers are impressive.
All 50 of the worst stocks in the S&P 500 in 2020 are up this year so far, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And not at all. The worst stocks in the S&P 500 in 2020 are now averaging 33% in 2021 so far. This destroys the 5% gain for the S&P 500 this year. And the last 10 stocks of the 2020 S&P 500 are doing even better: 44.8% this year. Most are energy stocks.
Some of the jumps are notable. See the Occidental. The shares have already risen more than 76.9% this year, to 30.63. This should hurt Buffett a little. The shares fell to 18.30 each at the end of the second quarter, during which time Buffett discharged his nearly 19 million shares. The shares fell by half from the beginning of 2020 to the end of the quarter that Buffett finally sold.
But those shares are worth an additional $ 233 million now. Occidental now has an IBD Relative Strength rating of 88. This means that the stock is outperforming 88% of all others.
And there is United Airlines, a favorite share of generation Y investors. Shares plunged in 2020, dropping to 34.61 in the second quarter of 2020, during which Buffett discharged his entire stake. But airline stocks are now up 30% this year. This makes the 22.1 million shares that Buffett sold worth another $ 480 million.
Role reversal reverses the S&P 500
There is no denying that the pandemic and the next economic downturn caused this turnaround for market winners. Cruise operators on the S&P 500, which Buffett does not own, show what I mean.
Carnival (CCL) plunged 57% in 2020 to 21.66 per share, as reserves fell. It was the second worst stock on the S&P 500 in 2020. But the shares rose 31.4% this year, to 28.46, making it the 54th best share of the S&P 500 this year. The Relative Strength of Carnival IBD is now 69. And then there is Norwegian Cruise Line (NCLH). Shares plunged 57% in 2020, but this year? It rose 21% and boasts a Relative Strength of 80. Do you know if you should buy Carnival shares now?
Don’t feel bad about Buffett. Berkshire Hathaway’s shares are up 13.5% this year, as many of its other value investments, such as railways and finance, have returned. But he is not receiving much comfort from his largest public holding company. Apple (AAPL), which represents almost half of its portfolio, fell 9% this year.
Experienced investors know that it is advisable to cut losses before they inflate more than 8% of your purchase price. But they also know how to read what the S&P 500 is saying then. And now, you’re saying that the worst of last year is the best of this year.
The worst stocks of the 2020 S&P 500 are skyrocketing
Company | Symbol | 2020% Stock Ch. | % CH. YTD stock | Sector | Relative strength |
---|---|---|---|---|---|
Western Oil | (OXY) | -58.0% (worst stock of 2020) | 76.9% | Energy | 88 |
Carnival | (CCL) | -57.4% | 31.4% | Discretionary Consumer | 69 |
Norwegian cruise | (NCLH) | -56.5% | 20.8% | Discretionary Consumer | 80 |
Raytheon Technologies | (RTX) | -52.3% | 9.8% | Industrial | 38 |
United airlines | (UAL) | -50.9% | 30.2% | Industrial | 58 |
Marathon oil | (MRO) | -50.9% | 82.9% | Energy | 91 |
ONEOK | (OKE) | -49.3% | 34.4% | Energy | 74 |
HollyFrontier | (HFC) | -49.0% | 58.8% | Energy | 77 |
Diamondback Energy | (FANG) | -47.9% | 69.4% | Energy | 91 |
Schlumberger | (SLB) | -45.7% | 32.9% | Energy | 71 |
Sources: IBD, S&P Global Market Intelligence
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