2025 Laggard Stocks Poised for 2026 Rebound: A Strategic Buy-the-Dip Opportunity in Seasonal Market Rotation

The stock market's cyclical nature has long been a cornerstone of strategic investing, with historical patterns offering insights into potential turning points. As we approach the end of 2025, a compelling case is emerging for a "buy-the-dip" strategy, particularly for stocks that have underperformed in the context of seasonal market rotation. This analysis explores the interplay between the 23-year market rotation pattern, the deep underperformance of 2025 laggards, and the fundamental strength of three undervalued sector leaders-Fortinet (FTNT), Hormel (HRL), and Pinterest (PINS)-positioning them as prime candidates for a 2026 rebound.

Historical Context: Seasonal Rotation and the "Sell in May" Debate

The "Sell in May" phenomenon, which posits that stocks underperform from May to October compared to the November-to-April period, has been a recurring theme in market analysis. According to historical data, the S&P 500 has averaged 3% returns during the summer months versus 6.3% in winter months. However, this pattern is not infallible. For instance, in 2020 and 2009, summer returns outpaced winter returns by significant margins, underscoring the risks of rigidly following seasonal strategies.

Goldman Sachs' 23-year market rotation pattern, while not directly verifiable in this analysis due to limited public data, aligns with broader seasonal trends. The 2025 laggard stocks, which have seen an estimated -19% absolute underperformance and -36% relative underperformance compared to the S&P 500, reflect a sharp reversal of earlier-year momentum. This divergence is consistent with historical cycles where overextended sectors face profit-taking and valuation corrections during the autumn months.

2025 Laggards: A Volatile November and Sector Rebalancing

The S&P 500's November 2025 performance was marked by volatility, with the index declining 5.7% from its October high before recovering to a modest 0.2% gain by month-end. This reversal was driven by a shift in investor sentiment, as defensive sectors outperformed cyclical and technology sectors. Technology, which had led the market rally earlier in 2025, underperformed sharply in November, with the S&P 500 technology sector declining 4.3% amid profit-taking and heightened scrutiny of AI-related valuations.

This sector rotation highlights the cyclical nature of market leadership. Stocks that faltered in late 2025-particularly those in technology and discretionary sectors-may now be undervalued, offering entry points for investors anticipating a Q1 2026 rebound.

Case Studies: Undervalued Sector Leaders with Strong Fundamentals

Fortinet (FTNT): Cybersecurity's Resilient Growth Story

As a leader in cybersecurity, Fortinet has faced headwinds in 2025 due to macroeconomic uncertainty and profit-taking in high-growth tech stocks. However, its fundamentals remain robust. The company's enterprise cybersecurity solutions are in high demand amid rising cyber threats, and its recurring revenue model provides long-term stability. Analysts have highlighted FTNT's strong balance sheet and consistent earnings growth, suggesting a potential rebound as market rotation favors defensive tech plays in 2026.

Hormel (HRL): Consumer Staples' Steady Foundation

Hormel, a staple in the consumer packaged goods sector, has underperformed in 2025 despite the sector's overall strength. This underperformance may stem from short-term concerns about inflationary pressures and shifting consumer preferences. However, Hormel's diversified portfolio-including iconic brands like Spam and Jennie-O-positions it to benefit from stable demand. Analysts have noted HRL's strong cash flow and disciplined cost management, making it an attractive value play as the market reopens to defensive sectors in early 2026.

Pinterest (PINS): Rebounding in the Social Media Space

Pinterest's 2025 struggles reflect broader challenges in the social media sector, including user growth fatigue and competition from AI-driven platforms. However, PINS has demonstrated resilience in monetizing its platform through e-commerce and AI-enhanced content discovery. With a low valuation multiple and a focus on international expansion, Pinterest is well-positioned to capitalize on renewed investor interest in tech stocks during the 2026 "winter rally".

Strategic Case for a "Buy-the-Dip" Approach

The confluence of seasonal rotation, sector reallocation, and undervalued fundamentals creates a compelling case for a "buy-the-dip" strategy ahead of Q1 2026. Historical data suggests that the S&P 500's winter months (November–April) have historically outperformed, with an average return of 6.3% from 1990 to 2024. For 2025 laggards like FTNT, HRL, and PINS, this period could represent a critical inflection point.

Investors should focus on three key factors:
1. Valuation Metrics: All three stocks trade at discounts to their historical averages, offering margin of safety.
2. Earnings Momentum: Strong Q4 2025 earnings reports for these companies could catalyze a rebound.
3. Sector Rotation: Defensive and cyclical sectors often reverse roles in early 2026, aligning with the S&P 500's historical winter strength.

Conclusion

While the 2025 market environment has been volatile, the underperformance of laggard stocks like FTNT, HRL, and PINS presents a strategic opportunity. By leveraging historical seasonal patterns and sector-specific fundamentals, investors can position themselves to capitalize on a potential 2026 rebound. As the market prepares for a new cycle, a disciplined "buy-the-dip" approach may prove to be one of the most effective strategies for navigating the evolving landscape.