With the "Dogs of the Dow" investing strategy, you invest in the worst-performing Dow Jones Industrial Average (DJINDICES: ^DJI) components. The idea is that these top-notch businesses should come back strong from whatever challenges might come their way.

Some investors prefer a tweaked version of that stock-picking strategy. Sure, the Dow Jones Industrials is an elite group, but so is the S&P 500 (SNPINDEX: ^GSPC). A small minority of the total American stock market qualifies for this exclusive list, and it's a more diverse collection. Shouldn't the worst performers of the S&P 500 also be poised for a strong comeback?

Well, let's check out how this Dogs of the S&P 500 idea holds up. These are the three worst performers on the broader stock market index in 2023.

Company

Year-to-Date Performance

1-Month Performance

Market Cap

SolarEdge Technologies (SEDG 1.51%)

(70.7%)

(39.2%)

$4.7 billion

Enphase Energy (ENPH 1.73%)

(62.7%)

(20.8%)

$13.5 billion

Moderna (MRNA 3.49%)

(55.2%)

(19.8%)

$30.6 billion

Data collected from Finviz.com on Oct. 21, 2023.

So, how did they get to this low point, and where might the three stocks be headed next? Should you buy these dogs on the cheap, or did they deserve these dramatic price cuts?

SolarEdge and Enphase: Dimming short-term prospects in the solar sector

Solar power management expert SolarEdge fell off a cliff in recent months. The stock fell 10% in July, another 33% in August, and 25% in September. And the pain didn't stop there. SolarEdge's stock has taken another 36% haircut in October.

Enphase's stock followed a similar trajectory in the last three months, but each drop was smaller than SolarEdge's. On the other hand, this stock took a 24% price cut in April, while SolarEdge suffered a milder drop of 9%.

The tight correlation between these two charts makes sense and points to a sector-wide root cause rather than company-specific problems. Both specialize in optimizing the power output from solar panel systems, relying on different types of smart technology.

Enphase's microinverters are the most efficient tools on the market but also the most expensive to install. SolarEdge's power optimizers strike a balance between high-end performance and affordable prices. If one of these stocks is soaring or sliding, the other shouldn't be far behind.

I wrote this article with the power of a SolarEdge system on my roof, but I don't have intimate knowledge of the solar energy business. Fellow Fool Travis Hoium is a stone-cold expert in this field, and he thinks these stocks have a bright long-term future -- but "things could get worse before they get better" at this point.

The solar industry is always in flux and is knee-deep in a downturn right now. The ongoing inflation crisis and rising interest rates lowered the demand for solar power systems. Struggling system installers are forced to negotiate lower component prices, reducing profit margins for providers like SolarEdge and Enphase.

We are looking at two high-quality companies in an important industry. However, that sector is under intense economic pressure, and this might be the start of a lengthy downturn.

In other words, I wouldn't bet the proverbial farm on SolarEdge or Enphase right now. At the same time, it seems reasonable to start nibbling at these low-priced stocks over time, building a long-term position while taking advantage of downward pricing trends.

Moderna: A shot of boom-and-bust reality

Biotechnology expert Moderna took a different path to Wall Street's basement. The coronavirus health crisis is no longer an official pandemic, and demand for Moderna's COVID-19 vaccines is waning. The company is searching for another blockbuster idea, but that chart-topping hit left some canoe-sized shoes to fill. Moderna's business results are fading, and the stock took another hit last week as fellow vaccine maker Pfizer (NYSE: PFE) lowered its full-year outlook for coronavirus-related product sales.

I'm not necessarily saying that Moderna's golden age has come and gone, never to return. This company has many advanced projects in its pipeline, targeting diseases such as HIV, the Epstein-Barr virus, Lyme disease, and cancer. Any one of them could rejuvenate Moderna's ebbing business results.

But that's a high-stakes gamble. Yes, some of Moderna's development projects look promising, but that doesn't guarantee a happy ending with full approval from the Food and Drug Administration (FDA) and market-moving sales. Many biotech stocks have come and gone over the years, limited to a brief period of market-beating results followed by tumbleweeds and chirping crickets.

And Moderna could be headed in that direction now. The company's top-line sales fell by a hair-raising 93% year over year in the second quarter. At the current rate of negative cash flows, Moderna could run out of cash reserves in a couple of quarters. The need for a new hit product is imminent and desperate, and I would not dare to bet on it.

We should largely leave the Dogs of the S&P 500 alone

The overarching theme of the S&P 500's worst performers is that several industries are changing on a fundamental level. Investors must be ready to roll with the punches. If I owned any shares of the three stocks under my microscope today, I might want to sell Moderna and hold on to the solar power experts for dear life. I don't see any slam-dunk buying opportunities here, and any buying on the dip should be done on a modest scale.

The time to really double down on SolarEdge and/or Enphase may come later. And with Moderna, I'll gladly watch the struggle for survival from the sidelines.