The stock market has staged a mighty comeback since bottoming on March 23. But this rising sea hasn’t floated all boats—and often for good reason.
Dow Jones Industrial Average
gained 28% from March 23 through April 24, while the
rose 27%. And some stocks have soared even more during that period.
Not these guys. This list shows the five worst-performing stocks since the market bottom, and what they need to get moving higher again.
(LUV): -13%. Southwest has the strongest balance sheet of all the airlines, which helped it lose less when the market tumbled. But that doesn’t mean much when your sales have almost completely dried up. It doesn’t help that
Warren Buffett’s Berkshire Hathaway
(BRK.B) lightened up on its stock earlier this month. How it could head higher: Signs emerge that people might be allowed to fly again.
(KIM): -8.6%. Kimco owns malls and shopping centers, which wasn’t a great business to begin with before coronavirus, and is even worse now that no one can go shopping. The stock fell 49% from the S&P 500’s Feb. 19 top through its March 23 bottom, and has continued sliding. How it could head higher: Shoppers return to the mall, and retailers start paying their rent again.
(HBI): -6%. Hanesbrands was struggling before coronavirus came along—underwear has long since become a commoditized product, especially without department stores to help push up margins—and coronavirus probably won’t help. Then there’s the problem of its debt: It trades at 4.5 net debt to 2020 Ebitda, according to UBS analyst Jay Sole, who rates the stock a neutral. How it could head higher: “If HBI can offer data points showing the bull case has more merit than the bear case does, it could cause the market to not only expect a stronger FY21 rebound, but also ‘look through’ a potential 1Q20 EPS miss,” Sole writes.
United Airlines Holdings
(UAL): -2.6%. United is in worse shape than Southwest, but its stock has dropped 67% from the market’s all-time high, far more than Southwest’s 41% decline. How it could head higher: Signs emerge that people might be allowed to fly again.
(DLTR): -2.4%. Dollar Tree held up better than most stocks when the market was getting hammered, dropping just 17% from the S&P 500’s all-time high on Feb. 19. Dollar Tree’s business is holding up fine, and may get a boost from stimulus checks going out, but investors are worried about its adjusted debt leverage at 3.4 times, according to JPMorgan analyst Matthew Boss. How it could head higher: Debt paydown progresses, while company benefits when consumers feel comfortable enough to start spending.
Write to Ben Levisohn at Ben.Levisohn@barrons.com