Is it time to buy the worst-performing S&P 500 stocks since August?

popular S&P 500 (^GSPC -2.12%) had a pretty decent month in August 2024. Economic news was more good than bad last month, lifting the index by 126 points (or 2.3%).

But it hasn’t been a smooth ride. 52 of the S&P 500’s 503 components gained more than 10% in August, while 20% of members saw price declines of 10% or more. Three of these surnames had haircuts of 30% or more.

What happened to the three worst-performing S&P 500 stocks in August — and are they great buys or dangerous value traps right now?

Let’s find out.

Super Micro Computer: Down 37.6% in August

Builder of server systems Super Micro Computer (SMCI 0.93%) made two deep dives in August.

First, the company reported mixed fourth-quarter results on August 6. The company also announced a 10-for-1 stock split that evening, but the move didn’t distract investors from its spotty earnings report. Instead, they focused on Supermicro’s thin profit margins, and the stock closed 20.1% lower the next day.

The last week of August saw a 19% drop in price for a single day. A short-selling firm has issued a scathing report on the company, compounded by Supermicro delaying the filing of its annual report on the same day.

Short sellers often make nasty headlines with their accusations, but their track record for accuracy is unimpressive. That said, the late filing of annual financial statements and weaker profit margins add up to a bleak picture for many investors. In particular, Supermicro worries about the company’s pricing strategy, as on-demand artificial intelligence (AI) servers sell at lower margins than other systems.

As it stands, Supermicro’s stock looks like a lower-priced version of its rival della. Management says Supermicro’s margins should rebound in 2025, as current pressure has stemmed from a rapid expansion of the company’s manufacturing facilities and a costly ramp-up of its advanced liquid-cooling technology.

The stock might be worth the risk if you’re willing to bet on Supermicro’s pricing power over the long term. Otherwise, Dell stock is a more stable way to approach the same AI systems space at a reasonable valuation. Check your risk tolerance and invest accordingly.

Moderna: Down 35.1% in August

Vaccine innovator Modern (MRNA -5.76%) it only took one significant dip last month, but it was a steep one.

The company reported second-quarter results on Aug. 1, crushing Wall Street’s average revenue target but falling short of the consensus projection. More importantly, management lowered its full-year product sales outlook from about $4 billion to about $1.3 billion.

The weak revenue outlook resulted from weak sales in Europe and stiffer competition in the US market for respiratory vaccines.

Should you take a second look at Moderna while the stock is on the decline?

Well, the company is facing the painful combination of increasing competition and lower margins for its coronavirus vaccine. In addition, it could overcome this difficulty with a broad portfolio of treatments for other diseases, including respiratory viruses and my own touchstone for multiple sclerosis. The company is putting its COVID-19 bottom line to work, hoping to build a solid long-term business.

At the same time, regulatory approvals are hard to come by in the risky biotech industry, and Moderna is still in the shadow of much larger rivals in the sector. Moderna’s share price is now down 54.6% from its 52-week highs in May, but I’m still happy to stay on the sidelines. Renowned growth investor Cathie Wood is buying the stock, but there are too many variables at play for my taste.

Dollar General: Down 31.1% in August

Discount store operator general dollar (DG 0.99%) it might seem like a safe bet in this era of stinging inflation and tight family budgets. However, the company’s financial statements do not support this assumption at this time.

This stock almost made it to the goal line unscathed, posting a 2.3% gain from the end of July through August 28. But Dollar General reported its second-quarter results before the opening bell on the 29th, and it wasn’t good news.

The company missed analysts’ consensus revenue and earnings targets, management said its customers were feeling “financial constraints” in this economy, and full-year revenue guidance was cut from about $39.7 billion to $39.1 billions of dollars. The stock price fell 32.1% that day.

Dollar General hopes to turn the tide with an aggressive discount program this fall. This could increase top-line sales, but at the cost of an already thin profit margin that gets even thinner:

DG Profit Margin data by YCharts

Dollar General can’t afford to get into an all-out price war with other discount stores, but that’s the plan. This stock is trading at 7-year lows for good reason. It would take an impressive turnaround effort to fix what’s wrong with Dollar General. Bigger discounts don’t seem like the right idea.

Should you invest in any of these struggling stocks?

Here it is. Among the three worst performers on the S&P 500 in August 2024, Supermicro could be a somewhat speculative value play. In my opinion, Dollar General and Moderna come with more risks than potential upside. All things considered, most investors should probably leave these struggling names alone right now. After all, there are plenty of low-risk fish in the sea.