If you're a fan of buying stocks while they're on sale, there's certainly no shortage of such names right now. Although the S&P 500 (^GSPC 0.31%) itself seems to be in recovery mode following February's stumble, plenty of its components have yet to recover. In some cases, they're still sliding lower.
Before pouncing on one of these stocks simply because it's down by double-digit percentages, though, you might want to take a step back and assess the full situation. Sometimes sell-offs are mistakes. This time though, investors seem to be making calculated, reasonable decisions.
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What went wrong for these four stocks
Etsy (ETSY +3.44%), Whirlpool (WHR +0.40%), homebuilder PulteGroup (PHM +0.68%), and Hasbro (HAS 1.95%) are March's biggest S&P 500 losers, falling 20%, 14%, 16%, and 15%, respectively. For comparison, the index itself rallied a little more than 3% in March.
Most of the time there's a clear common thread among the market's worst laggards. Not this time, however.
NYSE: ETSY
Key Data Points
Shares of e-commerce platform Etsy, for instance, initially soared in March in response to encouraging quarterly numbers released in late February. After thinking on it for a few days, though, investors began worrying that its plans to raise selling fees might do more harm than good. Toymaker Hasbro's stock price is off in the wake of a war of words it's waging with activist investor group Alta Fox, which is calling for (among other things) a shakeup of the company's board of directors and a spinoff of its Wizards of the Coast unit. Although initially cheered by shareholders, that matter has turned contentious, adding to the impact of Russia's invasion of Ukraine. Shares of PulteGroup -- you may know it better as Pulte Home Builders -- slumped largely in response to waning interest in home purchases. February's pending home sales slide marks the fourth straight month the National Association of Realtors' measure has contracted. And Whirlpool? Actually, there's no directly discernible reason Whirlpool tumbled in March, though it's safe to say geopolitical unrest in Ukraine had something to do with it.
It's a curious collection of setbacks. As noted, there's no clear common theme. That's why they should worry would-be buyers.
Not all weakness is the same
Trying to time the market is a notoriously bad idea. Most people simply can't do it well, mostly because it wasn't meant to be done.
NYSE: WHR
Key Data Points
There's a difference, however, between merely passing on the purchase of a beaten-down stock and paying attention to what the market is telling you about a company. In all four cases discussed above, investors' concerns are perfectly reasonable. It's not clear how many Etsy sellers will balk at higher selling fees. It's not clear if Hasbro will be better off, or merely distracted, by Alta Fox's new involvement. And, with interest rates finally on the rise and the economy itself being threatened, it's not clear that demand for new homes isn't going to weaken.
This rationalization is different than the environment we were in as recently as January, when stocks really started getting shellacked. Then, the omicron variant of the coronavirus was just starting to spread, leading investors to conclusions about more temporary shutdowns that mostly didn't end up happening.
The market's response to Russia's invasion of Ukraine in February also sparked fears that have since proven less severe. While the events unfurling there have been unsettling, the matter has mostly been contained within Ukraine. It doesn't appear Vladimir Putin has any real interest in escalating his actions -- at least not yet. Still there is long-term uncertainty here as oil prices remain elevated, select other commodities are quite volatile and some supply chains are getting further hampered by the turmoil, exacerbating already existing problems rather than easing them.
NYSE: PHM
Key Data Points
The four sell-offs in focus above, however, aren't rooted in what will end up being relatively short-lived issues. The market is thinking these sales through and sees that they just might be cyclical and/or fundamental challenges that are unique to each company.
Keep your finger on the market's true pulse
None of this is to suggest that buying any or all of these stocks will guarantee disastrous results. And, if you happen to already own any of them, this isn't necessarily a call to sell them. Each company may face a tough 2022, but each will survive its current challenges. The stocks have already taken their lumps, so to speak.
It is to suggest that you need to make a point of differentiating between marketwide, panic-induced selling and rationalized, company-specific selling. The former is often short-lived. The latter is often a warning of something longer-lived. Most of last month's weakness for these stocks reflects the latter here.
