Stocks are up big this year. Year-to-date, the S&P 500 has rattled off a 21% gain. That’s a big rally. Even if stocks were to trade sideways into the end of the year, they would still close with their biggest annual gain since 2013, and their fourth biggest annual gain since 2000.

But, as is true with all market rallies, not all stocks have participated in the 2019 rally.

There have been some major laggards in the S&P 500. Specifically, there are seven stocks in the index which have lost at least 25% of their value in 2019.

Which seven stocks are those? Will they remain losers for the foreseeable future? Or will they bounce back?

Let’s answer those questions by taking a closer look at the worst stocks of 2019 so far.

Worst Stocks of 2019: Macy’s (M)

Year-to-Date Loss: 47.6%

Through September, the worst performing stock in the S&P 500 is Macy’s (NYSE:M).

Being an underperformer is nothing new for Macy’s stock. Shares of Macy’s have been in a secular downtrend for several years now, as the mall retail stalwart has struggled to adapt to the shifting sands in the commerce world. These struggles have continued in 2019. Comparable sales growth has hugged the flat line, margins have dropped and profits have tumbled. As these struggles have continued, investors have grown increasingly skeptical that Macy’s will survive e-commerce disruption, and M stock has sputtered to multi-year lows.

There is potential for a rebound rally in M stock here. Specifically, management has outlined what looks like a pretty good strategy to get things back on track — including cutting back on promotions, reworking the supply chain and prioritizing private label brands. But, Macy’s has turned into a “you have to see it to believe it” situation.

As such, speculating on a Macy’s turnaround here just doesn’t seem worth it. Instead, the best course of action is to monitor the situation from the sidelines and buy in only when the numbers here confirm that things could turn around.

DXC Technology (DXC)

Year-to-Date Loss: 39.4%

The second worst stock in the S&P 500 through September is IT services provider DXC Technology (NASDAQ:DXC).

Shares of DXC are down nearly 40% year-to-date on the back of slowing revenue growth, margin compression, and profit erosion. Specifically, DXC used to be a positive revenue growth company with expanding margins and rising profits. But, the company’s legacy infrastructure business has come under tremendous pressure over the past 18 months as the global economic backdrop has slowed and accelerated secular pressures challenging that business. While the digital business has remained largely healthy, digital strength has not been good enough to offset infrastructure weakness.

At current levels, the rebound thesis in DXC stock looks compelling. Infrastructure weakness will persist. But, it should ease as global economic conditions improve. Easing infrastructure headwinds will couple with continued digital strength to push this company back into positive growth territory, on both the revenue and profit fronts. At just 3.7 times forward earnings, DXC stock is not priced for renewed profit growth.

Thus, as soon as this company does inflect back into positive profit growth territory, DXC stock could fly higher.

Nektar Therapeutics (NKTR)

Year-to-Date Loss: 39.4%

The third worst performing S&P 500 stock through September is biopharma company Nektar Therapeutics (NASDAQ:NKTR).

The 39.4% year-to-date slide in NKTR stock can be attributed entirely to multiple hiccups in Nektar’s drug pipeline. First, pre-clinical data from the company’s NKTR-255 treatment, designed to stimulate the immune system’s natural killer cells, came in sluggish. Second, Nektar’s application for opioid NKTR-181 for low back pain has been delayed as the FDA reviews its policies for opioid painkillers. Third, Nektar had a quality control issue with NKTR-214, used to treat metastatic melanoma, which presumably sets the timeline for that immunotherapy back a few months.

Until a positive catalyst arrives, NKTR stock will likely remain in a downtrend. Unfortunately, it is near impossible to tell when such a positive catalyst will arrive. That is, no one really knows when the FDA will start approving opioids again, nor does anyone have a good handle of when good news will come with respect to NKTR-255.

As such, the best thing to do with NKTR stock here is to let it keep sliding.

Abiomed (ABMD)

Year-to-Date Loss: 39%

The fourth worst stock in the S&P 500 through September is heart recovery and support technologies provider Abiomed (NASDAQ:ABMD).

The struggles in ABMD stock started in early February, when a U.S. Food and Drug Administration letter to healthcare providers cautioned on increased mortality risks for patients using Abiomed’s core product, the Impella RP heart pump. Ever since — and perhaps not coincidentally — the Abiomed growth narrative has slowed meaningfully. Just days before the FDA letter, Abiomed reported third-quarter numbers that included 30% revenue growth. In Q4, revenue growth slowed to 19%. In Q1, it slowed to 15%. As Abiomed’s top-line growth has slowed, ABMD stock has tumbled.

The stock could turn around here for similar reasons. The slowdown appears to be mostly over. Consensus Street estimates call for 16% revenue growth this year, and 17% next year — implying growth acceleration heading into next year. At the same time, the stock trades at a multi-year low valuation, with the secular growth drivers here still alive and well.

The slide in ABMD stock will stop once growth deceleration stops. That should happen soon. Once it does, today’s relatively depressed valuation leaves room for a healthy recovery rally in ABMD stock.

Kraft Heinz (KHC)

Year-to-Date Loss: 35.2%

The fifth worst performing stock of 2019 so far is global snack giant Kraft Heinz (NASDAQ:KHC).

As is the case with many of the stocks on this list, KHC stock has been down for a long time. The stock is down more than 35% year-to-date, but relative to its early 2017 highs, the stock has dropped 70%. The culprit is mismanagement. When Kraft and Heinz merged in 2015, the overarching goal from management was to cut costs rapidly to realize operational synergies between the two companies, and ultimately boost profits. In their obsession with cutting costs, management forgot to invest into growth-related areas. Revenue growth consequently went negative — and it fell faster than operating expenses. Thus, profits dropped too, and this profit erosion has sparked a big selloff in KHC stock.

A rebound could happen here with new management in place. This new management team is less obsessed with cost-cutting, and more obsessed with organic growth. That’s the right mindset to adopt going forward. It should stabilize revenue growth, and return the company to positive profit growth. But, much like Macy’s, Kraft Heinz has been so bad for so long that this is a “show me” situation.

Thus, until Kraft Heinz proves that it can leverage organic drivers to return to profit growth, it’s probably best to remain on the sidelines here.

Gap (GPS)

Year-to-Date Loss: 31.5%

Another retail stock which makes this list of the S&P 500’s worst stocks through September is apparel retailer Gap (NYSE:GPS).

It has been a busy year for Gap. The company is in the process of spinning off Old Navy — one of the few chains in the portfolio that has performed consistently well over the past several years — and is hyper-focused on dramatically expanding Old Navy’s store presence and reach, while simultaneously improving the growth trajectories at Gap’s other depressed chains like Gap and Banana Republic. Investors are unsure of this growth strategy — hence the near 31.5% plunge in GPS stock this year.

But, I think this strategy will work. Old Navy is a strong brand that has been firing off positive comps on big margins for a long time. There is a tremendous opportunity to expand its real estate footprint across North America. At the same time, spinning off Old Navy will allow Gap to focus on struggling Gap and Banana Republic stores. Presumably, more focus on those stores will result in improved numbers. Broadly, then, Gap’s whole growth trajectory should improve from here.

GPS stock is not priced for that. At just 8.4 times forward earnings, GPS stock is dirt cheap. Thus, if the growth trajectory does improve in 2020-2021, then that operational improvement will converge on a dirt cheap valuation to spark a meaningful recovery rally in GPS stock.

Nordstrom (JWN)

Year-to-Date Loss: 29%

This list started off with a mall retail stalwart. It also coincidentally will finish with a mall retail stalwart.

Shares of Nordstrom (NYSE:JWN) are down 29% year-to-date, making it the seventh worst performing S&P 500 stock through September. The cause of the decline? The same things which have caused Macy’s stock to plunge. Sluggish comparable sales growth, eroding margins and negative profit growth — all of which contribute to this idea that Nordstrom’s operations continue to be adversely impacted by the e-commerce shift. In response, investors have dumped JWN stock.

Will investors start buying the dip in JWN stock anytime soon? I think so. Unlike Macy’s, Nordstrom has actually fared pretty well amid e-commerce disruption over the past several years. That is, comps have been largely positive and margins have fared decently. Further, Nordstrom is already rolling out a new growth catalyst, inventory-free Local stores, which could provide a meaningful spark to growth in the near future.

As such, I think that — unlike the dip in Macy’s stock — the 2019 plunge in JWN stock is a compelling buying opportunity. Nordstrom is a retail survivor, and at the end of the day, the numbers will get better here. When they do, JWN stock will bounce back.

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