Last year's market losers are this year's big winners

General Electric (GE) plunged more than 50% last year and was kicked out of the Dow last June. But it already has soared more than 20% this year.
Investment banking giant Goldman Sachs (GS) is up about 20% so far in 2019. It was the worst Dow stock last year, falling nearly 35%.
IBM (IBM), the Dow's second-worst stock of 2018, has also enjoyed a comeback. Shares are up 9%.

It isn't just the worst of the Dow last year that have rebounded. Many small companies that got crushed in 2018 are now surging, too.

Cosmetics company Coty (COTY) was the worst stock in the S&P 500 last year, plummeting nearly 70%. It is up 17% so far in 2019.
Flooring maker Mohawk (MHK) fell about 60% in 2018 and is up more than 7% this year.
Auto parts supplier Delphi (DLPH), which lost more than three-quarters of its value last year, is up nearly 12% in 2019.

Why do big stock market losers from one year often rebound when the calendar flips?

Sometimes, a stock gets punished so severely that it starts to look attractive to bargain hunters betting on a turnaround.

And once value investors begin buying beaten-down stocks, that can attract the interest of momentum investors. Large mutual funds and hedge funds may lighten their positions in last year's market winners and chase the gains in new market leaders.

Big market laggards also often make management or strategy changes to get investors excited again.

Take GE, for example. Shares didn't really start to turn around until the company brought in a new CEO, Larry Culp, who has been willing to sell some underperforming businesses.

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Of course, the losers from the previous year aren't guaranteed to make a comeback, as GE's performance in 2018 clearly shows. After all, GE was the worst Dow stock of 2017.

And look at L Brands (LB), the struggling retailer that owns Victoria's Secret. The stock fell in 2016 and 2017 due to weakening sales, and then lost more than half its value in 2018. That made it the third-worst performer in the S&P 500.

Some companies are destined to stay in Wall Street's doghouse until they can actually fix some of the problems that led to their stock's big drops in the first place.

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