S&P 500 Analysts: 12 Stocks That Made You A Fortune Are Dead Money In 2021

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Payback is a bear, especially for stocks. And analysts are saying some of the top S&P 500 stocks of 2020 are now due for a breather.


A dozen stocks in the S&P 500 that soared 70% or more in 2020, such as materials company Albemarle (ALB), communications services’ Twitter (TWTR) and industrial Rollins (ROL), are expected to fall in the next 12 months, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

Savvy investors know to look for winning stocks that keep beating the S&P 500. But there’s an increasing chorus of analysts wondering if some big S&P 500 winners need to digest their massive 2020 gains. Already this year, investors made roughly $6.6 trillion, says Wilshire Associates. The S&P 500 is up 14.8% this year. Very few stocks pull off back-to-back big annual gains.

“In 2021, we will likely see a continued healing process, with progress and setbacks,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “Healing is underway, but healing takes time. And that will be the story of 2021.”

2020: Better Than Anyone Might Have Expected

If anything, talk of a “breather” is a pleasant surprise. The fact that 23 stocks in the S&P 500 are up 70% in the year of a pandemic is impressive. It’s just another reminder to always look to buy stocks at the right time.

The S&P 500’s nearly 15% gain this year is double its average 8.9% advance since 1945, says Sam Stovall, market strategist at CFRA. “Also, the S&P 500 recorded 30 new all-time highs, as compared with the average of 23 per year since World War II,” he said. Additionally, seven of 11 sectors gained in 2020 along with two out of three of the 147 sub-industries in the S&P 1500.

And yet, it was a tumultuous year like no other. “The S&P 500 had been up nearly 5% in just the first 1-1/2 months of the year, only to experience a swift 34% bear market that went from peak to trough in only 33 calendar days — three times faster than the bear market of 1987,” Stovall said.

Additionally, the S&P 500 recovered all that it lost in fewer than five months, which was the third-fastest recovery on record. It’s only natural some stocks got ahead of themselves.

90% Gain In A Year? S&P 500 Run To Cool

Albemarle is a dramatic example. The chemical processing company’s stock vaulted 90% this year to 138.90. Many of the gains kicked in late in the year. Many investors are turning bullish on materials stocks on the hope of a stronger economy in 2021.

And yet, the stock isn’t a true leader. Its IBD Composite Rating is just 79, meaning 21% of the market’s other stocks have superior fundamentals and technicals. And that might help explain why analysts think Albemarle’s stock will be 22% less in 12 months. It just looks like the stock got ahead of itself, in analysts eyes.

It’s important to note, too, Albemarle’s adjusted profit is seen falling 36% in 2020. And even if it jumps 5% in 2021 as expected, that’s still a third less than what the company made in 2019.

Twitter: Up Too Far, Too Fast

Short-messaging service Twitter, too, is another stock analysts think needs a short break. Shares are up 74% this year to 55.87. That’s an impressive run, that even tops the solid 25% rise by the Communications Services Select Sector SPDR (XLC) this year. Rock-solid management helped the company thrive during the 2020 Presidential Election.

And yet, analysts think the stock overshot their 12-month price target of 45.06 by 19%. The company is seen losing 78 cents a share in 2020. And even though it’s seen returning to profitability in 2021, analysts think it’ll only make roughly a third as much as it did in 2019. Do you know what to look at before buying Twitter stock?

Know True S&P 500 Leaders Can Prove Analysts Wrong

Don’t automatically assume analysts are right, though. Analysts’ caution in some cases might simply reflect they’re still catching up to what the market already knows.

A number of these companies have a long history of using top-notch management to consistently tap unforeseen growth.

Five of the S&P 500 stocks, including Etsy (ETSY), Cadence Design (CDNS), Teradyne (TER), Advanced Micro Devices (AMD) and PayPal (PYPL) are on the IBD 50 list of leading stocks. And AMD and PayPal are on the curated Leaderboard list, as well. PayPal’s CEO Daniel Schulman continues to show how he keeps finding new avenues for growth. PayPal topped profit forecasts in seven out of the past eight quarters.

Analysts might be right; some S&P 500 winners might need to digest gains. But in other cases, they’ll be scrambling to boost their price targets instead.

Due For A Breather?

S&P 500 stocks up more than 70% this year analysts say topped their 12-month price targets

Company Name Ticker YTD Stock % Ch. Downside Risk To Analysts’ 12-Month Target Sector Composite Rating
Albemarle (ALB) 90.2% -22.4% Materials 79
Twitter (TWTR) 74.3% -19.4% Communication Services 84
Rollins (ROL) 83.7% -16.0% Industrials 90
Align Technology (ALGN) 89.9% -14.6% Health Care 96
Etsy (ETSY) 330.6% -14.4% Consumer Discretionary 99
Idexx Laboratories (IDXX) 85.9% -10.7% Health Care 98
Cadence Design Systems (CDNS) 90.3% -9.0% Information Technology 99
Teradyne (TER) 76.8% -8.1% Information Technology 99
MSCI (MSCI) 71.6% -6.3% Financials 91
Advanced Micro Devices (AMD) 109.2% -4.8% Information Technology 99
PayPal Holdings (PYPL) 118.6% -4.2% Information Technology 99
West Pharmaceutical (WST) 84.7% -0.3% Health Care 92

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