Is It Time to Buy the S&P 500's 3 Worst-Performing May Stocks?

If you’re a bargain-minded investor, there’s certainly no shortage of stocks priced at a discount right now. Last month was more or less a breakeven for the broad market thanks to last week’s big bounce. For more than a few tickers though, the selling didn’t ease.

Before simply plowing into even the best of these beaten-down names from the S&P 500 index just because they’re beaten down, take a moment, take a step back, and take a breath. This is no longer the simple “buy-on-the-dlp” environment we all came to know and love for the better part of 2021. Everyone needs to weigh things more carefully now, appreciating that the market may be trying to tell us something by rewarding some stocks while upending others.

Image source: Getty Images.


Why they’re the worst of the worst

Overall, stocks as a whole did all right last month. The S&P 500 essentially ended May where it started it, finally stopping — at least for the time being — what’s turned into a sizable sell-off for the year.

Not every S&P 500 constituent followed suit, however. A handful of names lost a lot of ground. The worst of the worst performers? Under Armour (NYSE: UAA) (NYSE: UA), Target (NYSE: TGT), and DexCom (NASDAQ: DXCM), which fell nearly 32%, 29%, and 27% (respectively) in May.

UA data by YCharts

The bulk of DexCom’s weakness stems from speculation it was mulling an acquisition of indirect rival Insulet — a rumor that DexCom has since officially debunked. The combination of DexCom’s glucose monitoring technology and Insulet’s insulin pumps has its obvious upside. The timing of such a pairing was suspect, however, and the union of the two companies could present more complications than potential synergies.

Under Armour’s stock is down largely in response to news that current CEO Patrik Frisk is stepping down from the role, presenting uncertainty regarding the athletic apparel brand’s future. Adding to this investor angst is the fact that well-loved founder and former CEO Kevin Plank assured investors that he won’t be taking the helm again.

COO Colin Browne is serving as interim president and CEO while the search for a permanent head begins. Although Browne is capable enough, it’s arguably the worst possible time for Under Armour to be without permanent, decisive leadership.

And as for Target, while the retailer is surviving a tough inflationary environment, it’s hardly thriving in it. Shares suffered their worst single-day setback in years in the middle of May following an unexpected dip in last quarter’s earnings — from $3.69 per share to $2.19 — which also fell short of analysts’ estimates of $3.07 per share. While rival Walmart‘s lackluster quarterly report partially prepared investors for Target’s cost-crimped numbers, the market’s come to expect better from the smaller, nimbler company.

To buy or not to buy?

So are any of these tickers worth buying after last month’s setbacks?

To be clear, if you already own or end up purchasing any (or all) of these three names, you’ll probably be OK. These companies have all earned their way into the S&P 500; they’re clearly doing at least some things well.

Don’t be too eager to dig into these stocks solely because last month’s stumbles seem so over the top, however. It can’t be stressed enough — last year’s sweeping bullishness isn’t the norm.

While initially viewed in a bearish light, in retrospect the pandemic was more stimulative than stagnating. Consumers not only kept consuming but had to spend differently to adapt to lockdowns. Certain slivers of the economy that aren’t often boosted suddenly experienced strong demand (personal computers, streaming services, logistics, cybersecurity, etc.), while other areas didn’t exactly suffer as a result. This particular rising tide ended up lifting all boats more or less equally, making stock picking a relatively easy endeavor.

This year has not only been a reminder to never take such bullishness for granted but also marks the beginning of a great decoupling. Rather than buying any and all stocks indiscriminately, investors are now opting for reliable performers and finally steering clear of companies with fuzzier futures. While DexCom’s something of an exception, there’s little doubt that Target and Under Armour are not only facing unexpected challenges but facing challenges that could linger for far longer than most investors care to wait. The recent selling is in many ways a warning of what’s to come.

And it’s not just these S&P 500 stocks waving red flags regarding their foreseeable futures. A bunch of other high-profile stocks suffered similar setbacks in May for comparable, longer-lived reasons that could weigh on investors’ minds for the foreseeable future.

This isn’t to say these three stocks can never climb again. But it does say a sharp sell-off alone isn’t a good enough reason right now to dive into any stock.

The moral of the story is: Know your environment — we’re back in a so-called stock picker’s market.

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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Under Armour (C Shares). The Motley Fool recommends DexCom, Insulet, and Under Armour (A Shares). The Motley Fool has a disclosure policy.

If you know of local business openings or closings, please notify us here.

Honeygrow opens Quakertown location, next to Chipotle on Route 309, on June 3.

· Dunkin’ reopens remodeled restaurant at 1174 MacArthur Road in Whitehall Township

· Muse Modern Med Spa at 325 Fifth St. in Whitehall Township  will hold a grand opening June 4.

· Around Again, a consignment store, opened at 154 S. Main St., Phillipsburg

· Steak and Steel Hibachi, a restaurant in the works at 44 W. Walnut St., Bethlehem, still plans on opening late this summer. 

· Take It Outdoors Recreation Hub has moved to a spot along the Schuylkill River Trail at Riverfront Park in Pottstown, Montgomery County

· Pedego Electric Bikes has a new outlet in Lambertville, N.J. at 13 N. Union St.

· Amanda Vachris has opened a new Keller Williams Real Estate office at 15 St. John St. in Schuylkill Haven.

· Easton’s new West Ward Market will open Wednesday and be open on Wednesday’s through the summer from 3 p.m. to 7 p.m. The market, created by the Greater Easton Development Partnership, will sell fresh produce on 12th Street, next to Paxinosa Elementary School.

· Ciao Sandwich Shoppe is adding a second location, this time on College Hill in Easton. Ciao plans to open at 325 Cattell St. in late summer. Ciao already operates in downtown Easton at 12 N. Third St

· Ma’s Crepes and Cakes will hold a grand opening and ribbon-cutting June 16 at 46 W. Broadway, Jim Thorpe. The celebration starts at 5 p.m., with the ribbon cutting at 5:45 p.m. 

· Bethlehem’s Back Door Bakeshop will reopen as a wholesale operation at 7 E. Church St. in the city’s historic district. The business was open for nine years as a retail outlet at Broad and Center streets, before announcing in March that it would close the storefront April 3 and “go back to its origins as a wholesale business.”

·The Beef Baron on Catasauqua Road in Bethlehem is closed indefinitely for renovations

· The Brothers That Just Do Gutters are opening a new location in Allentown at 1302 N. 18th St.

· St. John Chrysostom Academy, an Orthodox school serving grades 1-9 starting this fall, held a grand opening at its St. Francis Center, Bethlehem, campus.

· Easton Commons, a shopping center anchored by Giant Foods at 2920 Easton Ave., Bethlehem Township, has a new name: The Shops at Bethlehem.

· Carbon County is getting a taste of Brazil at Uai Brasil BBQ at 315 Lehigh Ave. in Palmerton.

· The Keystone Pub in Bethlehem Township, at 3259 Easton Avenue, has reopened after a lengthy and expensive renovation. 

· The Trading Post Depot opened at 401 Northampton St., Easton. The rustic furniture store makes custom tables for dining rooms, desktops, conference centers and more.

· The Easton area has a new gym: Homemade Fitness at 444 Cedarville Road in Williams Township.

· Il Gaetano Ristorante opened at its 665 Columbus Ave., Phillipsburg, location. 

· Ciao! Sandwich Shoppe to open second location on College Hill in Easton, replacing The Kettle Room

· Rene and Grisellies Benique have opened Ezekiel 47 Cafe at 10 S. Fifth Ave., off Fifth and Penn avenues, in West Reading. 

· Alter Ego Salon and Day Spa in Emmaus is holding a grand opening Sunday, May 22, from 11 a.m. to 3 p.m., with a ribbon cutting at noon. 

· Origen Latin Fusion has opened at the site of the former Tomcat Cafe in Sinking Spring, Berks County. 

· Sellersville Senior Residences will hold a ribbon-cutting ceremony May 24. The Bucks County affordable-housing community for adults 55 and older has 50 apartments, with eight allocated for people with behavioral health needs.

· The House and Barn in Emmaus has opened its Shed outdoor dining and cigar bar area. The House and Barn is at 1449 Chestnut St. in Emmaus.

· Realtor Amanda Vachris and the Schuylkill Chamber of Commerce will hold a ribbon cutting at Vachris’s new Keller Williams Real Estate office at 15 St. John St., Schuylkill Haven, at 4 p.m. on May 24.

· Il Gaetano Ristorante will hold a grand opening on Friday, May 20, at 5:30 p.m. The 665 Columbus Ave., Phillipsburg.

· First Commonwealth Federal Credit Union will hold a grand opening at its new headquarters in Trexlertown, 6126 Hamilton Blvd., on May 18.

· Vinyl Press Signs & Graphics has relocated within Emmaus. The new site is 15 S. Second St., not far from the former Sixth Street location.

· Pedro’s Cafe in Emmaus to close

· SV Sports (formerly Schuylkill Valley Sports) to close Quakertown location

· Flemington DIY will host a Grand Re-Opening on May 14 at 26 Stangl Road, Flemington. The celebration will kick off at 10 a.m. 

· Elpedio’s Ristorante at Seipsville opened at 2912 Old Nazareth Road in Easton. The restaurant is open Wednesday through Sunday.

· Uai Brazil opened at 315 Lehigh Ave, Palmerton, offering both a seated or buffet option. 

· Colombian Mex Restaurant opened at 107 E Union Blvd in Bethlehem, offering traditional Colombian cuisine. 

· Precision Ink opened at 161 W Berwick St. in Easton. 

· King Wing opened a location in Bethlehem at 129 E. Third St., serving wings and sandwiches.