Stocks Getting Left Behind in the S&P 500 Rally: Are They Opportunities or Traps?

The S&P 500's 2025 rally has been driven by a familiar script: AI-fueled optimism, aggressive rate cuts, and a rotation into high-growth tech stocks. Yet, as the market's spotlight shines on the winners, a quieter story is unfolding in the shadows of the index. A subset of stocks-particularly in energy, construction, and utilities-are being left behind, their valuations and fundamentals diverging sharply from the broader market's euphoria. The question for investors is whether these laggards represent mispriced opportunities or traps cloaked in the illusion of value.

The Energy Sector: A Tale of Two Companies

The energy sector offers a stark contrast between underperformance and resilience. GeoPark Ltd., a Colombian oil and gas producer, epitomizes the former. S&P Global Ratings projects its EBITDA will plummet to $332 million in 2025, down from $443 million in 2024, as production declines to 27,000 boe/d due to operational challenges in Colombia. While the company's recent acquisition of Argentine Vaca Muerta assets has stabilized its outlook, the transition period is expected to weigh heavily on its financials until 2027.

In contrast, Seplat Energy PLC has emerged as a standout. S&P upgraded its outlook to "positive", forecasting EBITDA of $1.2 billion–$1.4 billion annually through 2026, driven by robust production (130,000 boe/d) and midstream project completions. Seplat's low net debt leverage and strong cash flow generation make it a compelling case of a company navigating sector volatility with resilience.

This divergence underscores a critical risk/reward dynamic: while GeoPark's near-term struggles may offer a discount for patient investors, Seplat's structural strengths suggest it is better positioned to weather macroeconomic headwinds.

Construction and Utilities: Margin Expansion vs. Earnings Pressure

The construction sector has seen mixed signals. Construction Partners Inc., a midstream construction firm, was upgraded to 'BB-' by S&P due to margin expansion, with adjusted EBITDA margins expected to hit the mid-14% range in 2025. This reflects the company's success in vertical integration and strategic acquisitions, which have insulated it from broader industry pressures.

However, Helmerich & Payne (HP), a drilling contractor, tells a different story. Despite a 40% year-over-year revenue increase, its consensus EPS estimate for Q4 2025 stands at $0.26-a 65.8% decline from the prior year. This earnings contraction highlights the sector's vulnerability to cyclical downturns and margin compression, even as top-line growth persists.

Macroeconomic Signals: A Looming Correction?

The Federal Reserve's internal divisions over rate cuts in 2025 have created a fog of uncertainty. Vice Chair Philip Jefferson advocates for a cautious approach to rate cuts, citing risks of inflation persistence and labor market fragility, while Governor Christopher Waller pushes for a December 2025 cut to stimulate employment. This policy ambiguity has left markets in limbo, with fixed-income markets pricing in a gradual reduction to 3% by 2026. Meanwhile, the S&P 500's recent four-day losing streak in November 2025-a first in a year-signals growing investor anxiety. Technology stocks, which had driven much of the year's gains, are now under pressure due to stretched valuations and fears of a prolonged high-rate environment. The rotation into defensive sectors like utilities and consumer staples suggests a shift toward risk mitigation, a trend likely to accelerate if inflation or labor market data surprises to the downside.

Valuation Metrics: Left Out vs. Underperformers

The key to distinguishing between "left-out" stocks and true underperformers lies in their valuation metrics. For instance, GeoPark's EBITDA decline is partially offset by its strategic Vaca Muerta acquisition, which extends its reserve life index to seven years. This suggests a temporary earnings drag rather than a permanent impairment. Conversely, Helmerich & Payne's earnings contraction reflects structural challenges in its core business, with EPS estimates seeing more downward revisions in the short term.

In construction, Construction Partners' margin expansion and debt reduction provide a buffer against macroeconomic shocks, whereas HP's earnings volatility points to a higher risk profile. Similarly, Seplat Energy's low leverage and cash flow stability make it a safer bet in a sector prone to commodity price swings.

The Case for Action

Investors should act now to capitalize on the asymmetry between these stocks. For energy, Seplat Energy's positive outlook and strong cash flow generation justify a long position, while GeoPark's near-term pain may warrant a cautious, dollar-cost-averaged approach. In construction, Construction Partners' margin resilience offers a compelling risk/reward profile, whereas HP's earnings trajectory suggests a short-term overhang.

The broader market's correction risk-hinted at by the Fed's policy uncertainty and the S&P 500's recent weakness-adds urgency to these decisions. As Goldman Sachs and Morgan Stanley have warned, a significant market pullback could be on the horizon. For investors with a medium-term horizon, the current environment favors a selective, sector-rotation strategy that prioritizes structural strengths over short-term volatility.

Conclusion

The S&P 500's rally has left behind a cohort of stocks that are neither dead money nor guaranteed losers. Instead, they represent a mosaic of opportunities and risks shaped by sector-specific fundamentals and macroeconomic crosscurrents. By dissecting valuation metrics, earnings trajectories, and policy signals, investors can navigate this landscape with precision. The key is to act before the market's next correction, which appears increasingly likely as 2025 draws to a close.