Investing in last year’s top 10 stocks is ‘a recipe for disaster,’ expert says
Look back on the best-performing stocks in a given year and you’re likely to see a mixed bag: some mainstays, some breakouts and maybe even a meme stock or two.
Not so in 2022. Each of the 10 top-performing stocks in the S&P 500 index belonged to the same sector: energy.
In a year in which every other sector in the S&P 500 lost money, energy stocks delivered an average return of 59%, with top performer Occidental Petroleum returning 119%.
However, that doesn’t necessarily mean you should go out and add any of these stocks to your portfolio now, investing experts say.
Following an overall down year in the market, “don’t chase the few things that have performed well,” Christine Benz, director of personal finance and retirement planning at Morningstar, told CNBC Make It. “Doing a complete repositioning of your portfolio is a recipe for disaster.”
Here’s why investing experts say to tread carefully before adding last year’s winners to your portfolio.
You’re historically slightly better off buying losers
The market operates in cycles, and this has been a particularly good one for companies involved in the discovery, transportation and sale of oil and natural gas. Energy prices shot up early in 2022 after Russia invaded Ukraine and the U.S. and EU took steps to curtail Russian energy exports.
But a cyclical market means eventual reversion to the mean. Energy will come back to the pack, and laggards will catch up. There’s no telling when that will actually happen, but historically losers have outperformed winners following a down year.
“If it’s an up year, history says to let winners ride. However if the prior year was down, you’re better off rotating from ‘first’ sectors like energy to ‘worst’ sectors like technology and consumer discretionary,” said Sam Stovall, chief investment strategist at CFRA.
By Stovall’s calculations, a “first to worst” rotation has beaten the market 60% of the time since World War II.
That’s isn’t to suggest you shift your entire portfolio into tech, the worst performer in 2022. Rather, it illustrates that the factors that drive certain corners of the market to take off are unpredictable from year to year.
Choose stocks sparingly and carefully
If you’re a long-term investor, financial advisors generally recommend building a broadly diversified portfolio. By spreading your bets across a wide array of asset classes, you decrease the chances that a sharp drop in any one particular investment derails your portfolio’s performance.
For that reason, investors are typically told to steer clear of devoting too much space in their accounts to any one particular stock. Unlike the broad market, which has historically trended upward, any one stock has the potential to go to zero.
If you do want to invest in a few stocks as a complement to your core broad-based investing strategy, ignore which way the market is trending and examine each stock on its own merits, experts say.
“As long-term investors, we don’t try to chase momentum,” said Dave Sekera, chief U.S. market strategist at Morningstar. “We focus on opportunities where the market doesn’t understand the intrinsic value of a company.”
There are plenty of ways to determine a company’s value, and each investor has their favorites. You may want to focus on how a stock trades relative to the company’s earnings or cash flow, for instance.
No matter which measure you choose, the more a company’s stock price has run up, the more likely it is that it’s trading more expensively relative to peers, the broad market and its historical averages. And there tends to be some mean reversion there, too.
Headed into 2022, energy stocks were the most undervalued by Morningstar’s calculations. And after a 59% runup? “It’s the sector we now think is the most overvalued,” Sekera said.
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A Tesla hacker has revealed that through a new software update, the automaker is working on a new Model Y with a 6-seat configuration.
Last week, we reported that Tesla referenced an upcoming 7-seat configuration for the new Model Y in communications with customers.
The automaker previously offered a 7-seat configuration for the Model Y, before the design refresh earlier this year. It was never very popular.
Now, we learn that Tesla is also working on a 6-seater configuration, which would be completely new to Model Y. Tesla offers a 6-seater configuration for the Model X, but it never did for other models.
Green, an infamous Tesla hacker who often reveals upcoming features by sifting through the code in new Tesla software updates, made the discovery and commented:
“The much-rumored 6-seater Model Y made an appearance in the firmware.”
There had been several rumors about the 6-seater Model Y in the past, but they were almost exclusively in China and referenced a potential longer wheelbase Model Y that never made it to production.
Now, Green notes that his findings point to the new version likely not being only for the Chinese market.
It’s not clear what a Model Y 6-seater could look like, but it would likely feature a 2+2+2 seating configuration with captain seats in the middle, much like the Model X.
Electrek’s Take
This is interesting. If Green is discussing it, it’s in the code, and Tesla is undoubtedly working on it, but it has not been confirmed to be made available. I’ll believe it when I see it.
For my money, if Tesla wants to introduce a 2+2+2 configuration on the Model Y with captain seats in the middle, you kind of need a longer wheelbase. Otherwise, something is getting smushed.
The third row in the previous Model Y was already tiny and only suitable for children or very small adults. A 2+2+2 configuration does give the opportunity to open up that third row a bit with potential for more legroom, but I’m really curious to see how that second row looks like in a Model Y after that.
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Zero Motorcycles announced this week that production of its new XE and XB electric motorcycles is now officially underway, with the first units set to begin shipping soon. The milestone marks a major step forward in Zero’s plan to expand beyond its high-performance electric motorcycles and tap into the growing market for more affordable EVs on two wheels.
“Bikes are rolling and the wait is almost over!” the company shared on its social media channels. “Zero XEs and XBs are coming off the production line and begin shipping worldwide over the next few weeks.”
The Zero XE and XB were first unveiled in November 2024 as part of the company’s shift towards smaller, less expensive electric motorbikes that could appeal to a wider customer base than the brand’s traditional $15,000–$25,000 flagship models. With new models that directly compete against Sur Ron and Talaria-style electric motorbikes, Zero is hoping to carve out a section of the much higher volume light electric dirt bike market.
Zero has long been considered one of the dominant players in the heavyweight electric motorcycle industry, but its pricing has remained out of reach for many would-be riders. Now these upcoming smaller and cheaper bikes aim to change that.
By leveraging Asian designs and manufacturing, the new XE and XB are significantly more affordable. The Zero XB is priced at $4,395, while the larger XE comes in at $6,495. That puts them in direct competition with smaller, value-focused e-moto brands like CSC, Ryvid, and even trail bikes like the infamous Sur Ron or Talaria.
However, the non-street legal status of the bikes in the US means that sales could be hindered, unlike in Europe where the XB and XE models are homologated for use on public roads.
While the price may be lower than the brand’s bigger flagship models, both bikes still wear the Zero badge. The pair is claimed to have been designed by Zero’s California-based engineering team and use a simplified version of Zero’s Z-Force powertrain system, though the models unveiled at EICMA still had a number of obviously Chinese-origin parts and stickers, including labels written in broken English. Now, over six months later, the production models are presumably rolling off the line with a bit closer inspections.
As far as specs go, the Zero XE carries a 4.3 kWh removable battery – one of the largest removable batteries in the industry. That battery powers a 15.5 kW (21 hp) peak-rated air-cooled motor that propels the bike up to 85 km/h (53 mph).
The slightly smaller XB has a more modest 7.5 kW (10 hp) motor and 2.4 kWh battery, which is also easily removable for charging. The bike has a slower top speed of just 28 mph (45 km/h), making it better suited for riders who want to focus on their skills or learn to jump, instead of merely riding fast. Zero rates the XB with a range of 47 miles (75 km), though time will tell how accurate that figure proves to be.
Zero has made it clear that these bikes are not meant to compete with its premium lineup but rather to complement it, offering a stepping stone into electric motorcycling for newer riders or urban commuters who don’t need highway performance, at least if those urban commuters are located in Europe.
With production now underway and shipping soon, we’ll soon see whether Zero’s bet on the low-cost electric motorcycle segment pays off. One thing is certain: with more affordable options like the XB and XE, Zero is signaling that the future of motorcycling isn’t just fast – it’s flexible.
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Texas lawmakers have officially requested that Tesla delay its planned Robotaxi launch in Austin by a few months due to a new law being implemented.
It’s a Godsend for Elon Musk.
As we previously reported, Tesla’s planned Robotaxi launch in Austin, Texas, now “tentatively” scheduled for June 22, is a moving of the goal post for Tesla.
CEO Elon Musk himself has previously described what Tesla plans to launch as “not really self-driving”, but the CEO is using the new strategy as a way to claim a win in autonomous driving after years of missed deadlines and failed promises.
Since last year, Musk has discussed launching the service in Austin this summer. For the last few months, he had indicated that it would happen in June, with the June 22nd date being officially shared last week.
For Musk to claim his win, Tesla would need to stick to the deadline, which would be a first for Tesla when it comes to its autonomous driving roadmap.
However, Texas lawmakers have just given Tesla an out.
A group of seven Austin-based lawmakers in the Texas Senate and House have signed a letter asking Tesla to delay its launch until September:
As members of the Austin delegation in the Texas Senate and Texas House of Representatives, we are formally requesting that Tesla delay autonomous robotaxi operations until the new law takes effect on September I, 2025. We believe this is in the best interest of both public safety and building public trust in Tesla’s operations. If Tesla opts to proceed with the June 22, 2025, launch date, we request that you respond to this letter with detailed information demonstrating that Tesla will be compliant with the new law upon the launch of driverless operations in Austin.
Texas has had very few regulations affecting autonomous driving, and the new law maintains this status quo. However, it also introduces requirements for following federal guidelines, and the latest version of the bill references SAE autonomous driving levels.
It doesn’t sound like the lawmakers are forcing Tesla to delay the launch for now. They are more politely asking to delay until the new framework is in place.
here’s the full letter from the Texas lawmakers:
Electrek’s Take
This appears to be a Godsend for Tesla and Musk. Even with the significantly reduced scope of the program compared to what Tesla has promised for years, and the fact that Waymo has been doing exactly what Tesla is trying to accomplish for years, it appears that Tesla is having difficulties delivering on that.
As we previously reported, testing without a safety driver has been extremely limited based on sightings, and it appears that Tesla has simply relocated the “safety driver” to the passenger seat with a kill switch for optics.
Now, Tesla can claim that it has to delay the launch to please the regulators rather than because it is not ready.
There’s also NHTSA, which put a deadline for today for Tesla to answer a bunch of questions about its planned Robotaxi launch in Austin. So, that could also play a role.
Now, let’s see if Tesla takes the out or decides to move forward. For everyone’s sake, I hope they take the out.
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