1 Former S&P 500 Stock Down 82% That History Suggests Buying at a Once-in-a-Decade Valuation

Usually, a company's deletion from the S&P 500 index makes it feel like a stock to avoid. However, a study from Research Affiliates analyzed stocks deleted from the S&P 500, Nasdaq-100, and Russell 2000 indexes and showed that the exact opposite may be the case.Running a backtest from 1991 to 2018, Research Affiliates found that stocks removed from the major indexes went on to outperform the broader market by five percentage points annually over the next five years.As counterintuitive as this sounds, it makes some sense. Typically, following the announcement that a stock is leaving an index, it is sold off heavily -- often into "value" territory. Thanks to this lower share price and, subsequently, lower valuation, these stocks seem to go on to outperform, partly because they have a lower bar that they need to clear to produce market-beating returns.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool