Is It Time To Buy the S&P 500’s 4 Worst-Performing Stocks?

For the S&P 500, 2022 was the worst year since 2008 as the broad market index fell 19.4%. While no one likes to see their portfolio fall, smart investors know that bear markets offer good buying opportunities. In fact, for net buyers of stocks, declines are good because they make stocks cheaper.

If you’re looking for bargains, there’s no better place to start than last year’s worst-performing stocks in the S&P 500. You might be surprised who made the list.

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1. Generac Holdings (down 71.4%)

Generac Holdings ( GNRC 2.76 ), a maker of generators, was one of a number of stocks that thrived during the pandemic but fell sharply over the past year.

The stock had risen in 2021 as housing costs and power outages in Texas led to a surge in demand for generators, but revenue growth slowed in 2022. The stock fell in October after a major customer filed for bankruptcy and the company lowered its guidance for the year.

Heading into 2023, Wall Street’s consensus is that the pandemic and massive outages have created a drag on generator demand, and analysts are predicting a decline in revenue in 2023. The spread of two-way electric vehicle (EV) charging it also poses a threat to the home standby or backup generator market.

Given these headwinds, Generac stock warrants a watch for 2023, though it trades at a reasonable price-to-earnings ratio of 11.

2. Match group (68.8% reduction)

You might be surprised to find Match Group (MTCH 0.25%) on this list, but like Generac, Match thrived during the pandemic before the stock gave up those gains as revenue growth slowed.

In its most recent quarter, revenue rose just 1% (or 10% in currency-neutral terms), and adjusted operating income was flat, though a stronger dollar likely played a role in this slowdown. A management change at Tinder has also led to a slowdown in growth from the company’s flagship app. However, currency-neutral revenues were up 16%.

Additionally, newer products like Hinge continue to perform well and Match dominates online dating. Match is still a growing stock with a large addressable market in front of it as well. If growth starts to accelerate again, the stock could rise.

3. Align Technology (67.9% discount)

Align Technology ( ALGN 1.96 ), the maker of dental aligners, was also a big loser last year. The company faced tough comparisons to 2021 when growth jumped due to a knock-on effect as customers returned to dental offices after avoiding them during the pandemic.

Revenue not only fell 12.4% in the third quarter, but also fell sequentially, indicating the company is facing recessionary headwinds. Its Invisalign dental aligners are expensive discretionary purchases, and consumers may delay purchasing these products because of concerns about inflation and a possible recession.

With Align’s growth story on hold for now, investors are better off avoiding the stock until its growth gets back on track.

4. Tesla (down 67.8%)

Tesla (TSLA -2.98%) has been a battleground stock for years, and after booming during the pandemic, the EV leader gave up many of those gains last year. While its overall financial results were solid, concerns over production growth and stiffening competition weighed on the stock.

But the biggest reason for Tesla’s decline in 2022 may have been CEO Elon Musk’s decision to buy Twitter. In doing so, Musk has become a lightning rod for political controversy, and a number of investors believe the distraction is detracting from his management of Tesla. Over the past few months, Tesla’s brand reputation may have deteriorated, and there is a risk that these headwinds will stick around.

The good news is that the stock looks reasonably priced right now with a price-to-earnings ratio of around 30. While Tesla remains a high-risk play, if the company can execute and stay ahead of the competition in EVs, it could recoup some from its losses from last year.

Jeremy Bowman has positions in Match Group. The Motley Fool has positions in and recommends Align Technology, Match Group and Tesla. The Motley Fool has a disclosure policy.