Talk about a crazy January for stocks: the GameStop short squeeze, new highs for the S&P 500 and then a sell-off. And there were some wild ways to make lots of money — fast.
Eight stocks in the S&P 1500 index, including mostly small caps like consumer discretionary GameStop and National Beverage plus healthcare Fulgent Genetics, soared 60% or more in January, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
The top stock in January? Short-squeezed GameStop soared 1,625%. And while the S&P 1500 includes the large-cap S&P 500, like GameStop, every top stock was small or mid-size. That's pretty amazing jump in a month the S&P 500 fell 1.1%.
Some think the small-cap rally is getting overdone. But it's hard to bail on an asset class that's working so much better than the S&P 500.
"As much as we've liked U.S. small caps for many months now, it's time to lighten up," said Nicolas Colas, co-founder of DataTrek Research. "This is not a table-pounding sell because plenty could — and should — still go right for this asset class in a U.S. cyclical recovery."
Small Caps Blow Past The S&P 500 In January 2021
If you didn't own small caps in January, you missed the party.
The Vanguard Small-Cap ETF rose 2.0% in the first month of the year and the SPDR S&P 600 Small Cap ETF is up even more: 6.2%. That's multiple times the 1.4% rise in the SPDR S&P 500 ETF.
And it's clear what's powering those gains. Seven of the nine top performing S&P 1500 stocks in January are in the S&P Small Cap 600. It's also obvious some other factors drove some of the huge gains.
GameStop jumped nearly 1,700% in January alone. GameStop is the most heavily shorted stock as the fundamentals look dismal. And yet, individual investors flooded into the ailing company's stock in the month. That caused a massive "short squeeze." The bearish professionals who controlled 130% of the available shares were pushed to buy the stock to cut their losses. Don't think GameStop's future is bright, though. It's seen losing more than $136 million on an adjusted basis in 2021.
Some Top-Rated Stocks Rally, Too
In fact, all the top performing S&P 1500 stocks in January are relatively popular with bearish investors betting against them. All see more than 5% of their available shares to trade controlled by shorts, which is the average among the S&P 1500. But not all are in intensely difficult financial positions like GameStop.
Nearly half the top S&P 1500 companies, including Ligand Pharmaceuticals, National Beverage, United Natural Foods and Fulgent Genetics sport top IBD Composite Ratings of 90 or higher. That means their stock action and fundamentals top 90% of all other stocks. Fulgent, for instance, is on pace to earn an adjusted $5.22 a share in 2020, up 2,647% from 2019. Nearly a third of its shares are controlled by bearish investors. And Ligand is a member of the IBD 50 list of outperforming stocks.
Investors didn't just pile into hated stocks. They also jumped into hated sectors. The long-struggling S&P 500 energy sector was No. 1 among the 11 in January. The Energy Select Sector SPDR ETF rose 3.7% in January.
Where Did The Big Caps Go?
Small caps' dominance is so massive, you have to look deep inside the S&P 1500 until you see an S&P 500 leader in January. The top S&P 500 stock in January is communications services company Discovery. It's up 37.7% in January. But that ranks it just No. 31 in the S&P 1500 in January.
What about FANG stocks? In January, Facebook is down 5.4%, Amazon is off 1.6%, Netflix is flat and Google parent Alphabet is up 4.3%.
So it looks like in January, the playbook changed. Small and hated stocks are now the most popular in the market. For now.
Top S&P 1500 Stocks In January 2021
| Company | Symbol | Size | January 2021 Ch. | Sector | Short Int./Float | Composite Rating |
|---|---|---|---|---|---|---|
| GameStop | Small | 1,625% | Consumer Discretionary | 131.8% | 78 | |
| 3D Systems | Small | 239.1% | Information Technology | 15.5 | 81 | |
| Fulgent Genetics | Small | 112.1% | Health Care | 31.7 | 99 | |
| Bed Bath & Beyond | Small | 98.9% | Consumer Discretionary | 68.7 | 88 | |
| Ligand Pharmaceuticals | Mid | 86.4% | Health Care | 65.1 | 98 | |
| National Beverage | Small | 78.5% | Consumer Staples | 82.9 | 95 | |
| United Natural Foods | Small | 69.6% | Consumer Staples | 27.1 | 97 | |
| Fossil Group | Small | 67.2% | Consumer Discretionary | 17.1 | 78 | |
| Designer Brands | Small | 60.1% | Consumer Discretionary | 12.3 | 65
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