Is It Time to Buy September’s Worst-Performing S&P 500 Stocks?

Let the good times roll. The S&P 500 rose nearly 21% in 2024, including a 2% increase in September. What’s particularly noteworthy is that the bull market has expanded to include more than just high-end tech stocks.

However, not all boats are lifted by the rising tide. Three stocks were particularly hard hit last month.

The dollar tree

Actions of The dollar tree (DLTR 0.17%) it fell 16.8% in September. The stock is down 50% so far in 2024.

Dollar Tree’s steep selloff last month came after the discount retailer reported disappointing second-quarter results on Sept. 4. Net sales rose just 0.7% year over year to $7.37 billion. Adjusted earnings per share (EPS) fell 26.4% to $0.67, well below the Wall Street consensus estimate of $1.04.

To add insult to injury, Dollar Tree cut its guidance for the full year 2024. The company now expects full-year net sales of $30.6 billion to $30.9 billion, compared with its forecast prior net sales in the range of $31 billion to $32 billion. Dollar Tree projects adjusted EPS between $5.20 and $5.60 versus its previous estimate of $6.50 to $7.00.

CEO Rick Dreiling said in the Q2 earnings press release that the company continues to face “immense pressures from a challenging macro environment.” However, he maintained that customer response to Dollar Tree’s expanded multi-price offering has been positive at the 1,600 stores where it has been implemented. The company has thousands of other stores that need to be converted to the multi-price format.

WATER

Actions of WATER (WATER 4.91%) down 14.2% last month. The performance added to the oil and gas exploration company’s ongoing woes: Its stock is down about 32% year-to-date.

APA’s biggest news in September was its announcement of an agreement to sell non-core Permian Basin assets to an undisclosed buyer for $950 million. However, most of the stock’s decline for the month occurred before this sale was announced.

So what made the stock fall last month? APA’s share price has been dragged down by a general malaise in the energy sector. Oil prices fell at the start of the month, weighing on many oil and gas stocks.

APA tends to be more volatile than many of its peers. Its beta coefficient is 3.24, much higher than the beta value of 0.68 for Energy Select Sector SPDR Fund.

Modern

Modern (MRNA -4.34%) earns the dubious distinction of being the third-worst performing stock in the S&P 500 last month. Shares of pioneer messenger RNA (mRNA) fell 13.7%. The biotech stock is down 33% year to date.

The company’s September 12 R&D update served as the main catalyst for the stock’s September decline. Moderna announced it is discontinuing five programs, including mRNA-1345, which targets respiratory syncytial virus (RSV) in infants.

However, the news that further stressed investors was Moderna’s lowering of its revenue guidance for 2025. The company now projects revenue of between $2.5 billion and $3 billion for next year, down from previous forecasts of revenues between 3 and 3.5 billion dollars.

Moderna also disclosed that it expects to break even on a cash operating cost basis in 2028. It previously predicted it would break even in 2026.

Do I buy on foot?

Is It Time to Buy S&P 500 Stocks Worth September’s Performance? I think it depends on your investment style.

Value investors who like turnaround plays may be interested in Dollar Tree. Its shares trade at less than 13 times forward earnings. The company’s plans to explore a sale or spinoff of Family Dollar could help Dollar Tree make a comeback. However, I think most investors will be better off staying on the sidelines for now with this discount retailer.

Income investors who are not too risk averse might like APA. The oil and gas company’s forward dividend yield is around 4.1%. However, my personal opinion is that other energy stocks with higher yields and lower volatility may be better choices than APA.

Aggressive growth investors may find Moderna attractive. The company expects to seek regulatory approvals for 10 products by 2027, including two by the end of this year. I suspect that Moderna could be a solid winner in the second half of this decade.