We recently published a list of the 10 Worst Performing Stocks in S&P 500 in 2024. In this article, we are going to take a look at where The Estée Lauder Companies Inc. (NYSE:EL) stands against other worst performing S&P 500 stocks in 2024.
Since 2023, the market has experienced extended winning streaks, reflecting the economy’s resilience. The most recent rally stretched six consecutive weeks but finally came to an end between October 21 and 25, marking the first week in six to close with a loss.
Nevertheless, the tech sector still closed with small gains as it was led by Tesla after its strong earnings. Despite that, now some experts in the market are trying to broaden their investments as they see uncertainty in the coming months, mainly due to the election and geopolitical reasons.
READ ALSO: 10 Best-Performing S&P 500 Stocks in the Last 3 Years and 10 Worst Performing Dow Stocks Year-to-Date.
A New Investment Approach Favoring Value Over Tech in Uncertain Times
James Cakmak, Chief Investment Officer at Clockwise Capital, detailed his recent shift from the tech-heavy Mag7 stocks into more diverse, value-focused sectors. Initially long on tech, Cakmak’s strategy changed due to heightened risks related to the election, geopolitical tensions, and economic cycles. While tech had seen significant growth, he felt it was essential to seek other opportunities for “alpha” as the market evolved.
Cakmak explained that Clockwise Capital has moved funds into undervalued sectors, such as automotive and metals, as well as smaller, less mainstream software companies.
Addressing inflation, Cakmak stressed the importance of keeping metals as a hedge. With inflation still showing signs of persistence and the Fed adjusting its rate cut expectations, he sees value in maintaining assets that traditionally perform well during inflationary periods, including gold.
Finally, he highlighted his commitment to semiconductors as a long-term investment theme, acknowledging their volatility but affirming their relevance in driving automation and productivity.
If we talk about other opportunities in the market, Goldman Sachs is bullish on undervalued quality growth stocks and cyclical value stocks as discussed by Christian Mueller-Glissmann from Goldman in a CNBC interview. We talked about it in our article: 12 Most Profitable Growth Stocks To Invest In. Here is an excerpt from it:
“Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes.”
Our Methodology
For this article, we checked the performance of the S&P 500 stocks and picked out the 10 stocks with the highest share price decline, as of October 24. The stocks are listed in descending order of their share price performance. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Estée Lauder Companies Inc. (NYSE:EL)
Number of Hedge Fund Holders: 47
Year-to-Date Share Price Performance: -39.06%
The Estée Lauder Companies Inc. (NYSE:EL) produces and sells a wide range of skincare, makeup, fragrance, and hair care products globally. Its skincare offerings include moisturizers, serums, cleansers, and suncare items, while makeup products include lipsticks, foundations, and various tools. The fragrance line features eau de parfum sprays and scented lotions, and hair care includes shampoos, conditioners, and styling products.
Estée Lauder (NYSE:EL) released its FY 24 earnings report in August which revealed a challenging landscape despite some growth in the second half of the year. Some factors contributing to overall performance included ongoing weakness in the prestige beauty market in Mainland China, necessary adjustments in Asia travel retail, and heightened competition in North America. As a result, organic net sales dropped 2%, with a 3% decline in the Asia Pacific region.
The decline in Asia travel retail led to a 2% drop in EMEA sales, and net sales in the Americas remained flat year-over-year. Skincare and hair care categories saw declines of 3% and 4%, respectively, while fragrance rose by 2%. Operating income fell 13% to $1.6 billion, with diluted EPS declining 25% to $2.59. The effective tax rate increased to 31%, showing a higher tax burden on foreign earnings.
According to the management, Estée Lauder’s (NYSE:EL) first-quarter results are anticipated to be pressured by ongoing challenges in Mainland China and Asia travel retail, with organic net sales expected to fall between 3% and 5%. Despite the difficulties faced in fiscal 2024, the company aims to leverage its brand strengths and strategic initiatives to cultivate growth moving forward.
Overall, EL ranks 9th on our list of worst performing stocks in the S&P 500. While we acknowledge the potential of EL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
