We’ve likely all heard about the Dogs of the Dow strategy by now, which entails buying up the highest-yielding, often worst-performing stocks within the Dow Jones Industrial Average at the start of the new year. And while the approach might not help investors gain a market-beating leg up, I do think that some variant of the approach can be applied to other indices. Take the Nasdaq 100, for example, a growth-heavy index that, while light on dividend yields, has its share of winners and losers in any given year.
And while the new year has yet to begin, I do think that the worst-performing names in the Nasdaq 100 or the Invesco QQQ Trust (NASDAQ:QQQ | QQQ Price Prediction), simply referred to by many investors simply as the “QQQ,” the list of laggards is quite extensive despite the impressive nearly 20% year-to-date gain posted by the index.
The Dogs of the Nasdaq 100?
Of course, buying the laggards isn’t an effective strategy, as losers can continue losing, not only into the next year but for many years to come, especially if there are structural issues at a firm or if headwinds facing it are too challenging for management to overcome. Either way, picking from the list of laggards and analyzing each individual name can be an intriguing way to spot value in a market that some would argue is getting kind of expensive.
As this bull market gets a bit longer in the tooth, value-conscious investors may wish to consider some of the more unloved names, some of which might be ready to pick themselves off the mat, either with a turnaround plan or something else that could act as a catalyst for renewed earnings growth or multiple expansion.
Let’s look at two of the bottom-10 performers in the Nasdaq 100 (or QQQ) that I think are actually great deals with managers that have the means to get past what’s weighing on the share price. So, here are my top two from the bottom 10.
Lululemon
It’s been a downward dog of a year for shares of yogawear firm Lululemon (NASDAQ:LULU), which is, at the time of this writing, the second worst performer in the Nasdaq 100. Indeed, apparel is a hard place to be in as an investor unless, of course, you’re in an up-and-comer disruptor that has all the market share to gain in the world. Undoubtedly, Lululemon products are pricey in an environment where consumers want more for their money.
With many analysts lowering their price targets and ratings, it’s hard to go bottom-fishing in a name that’s now lost close to 65% from its peak. Last week, Lululemon was downgraded by Bernstein, which cited “price markdowns” and worsening “traffic trends” as well as a lack of “proof points to support an inflection” as reasons behind the bearish tilt. Bernstein is definitely not wrong to remark on the headwinds facing the firm and the uncertainties the apparel maker faces going into 2026, which could easily see matters worsen before they improve.
Still, after seeing the share price get cut by nearly two-thirds, I think it’s too late in the game to be so negative on the firm. Are rivals, like Alo, going to be hard to compete with? Most definitely. However, with shares trading at 12.3 times trailing price-to-earnings (P/E), the expectations bar is low. Founder Chip Wilson noted that the brand is “losing its soul.” I think his acknowledgement of this and more board involvement could be a catalyst that turns the tide.
Adobe
Adobe (NASDAQ:ADBE) is another year-to-date dog that’s down just shy of 19% this year. The stock has now lost around 46% of its value from peak levels due to fears that AI will be a major net negative for the creative software company.
Indeed, with AI image tool Nano Banana picking up traction, it’s easy to be a seller of ADBE stock before things get even worse. While Adobe has been doing great things with Firefly and Sensei, its AI tech might not be enough to keep the moat intact as hungry AI-equipped rivals look to feast on software.
With Mizuho analysts saying things like AI will cause a “severe negative impact,” it’s hard to jump into a name like Adobe, even at these depths. Indeed, AI-first platforms have arrived, and that could mean nothing but pain for Adobe hereon out. Despite the AI risks, though, Mizuho is constructive on ADBE stock, with a $410 price target that implies a good amount of upside from current levels.
Perhaps most of the AI fears are already baked into the stock, and that’s why it might be time to be a buyer for the dip, especially if Adobe can prove it can do things better than its AI rivals. Simply having AI infused into the product suite is not enough; Adobe needs to do it better, perhaps much better.
Can it pull off such a feat? I suppose it’s possible if its agentic AI innovations change the game. With new agents showcased at the Adobe Summit earlier this year, questions linger as to whether they’re transformative enough to justify opening up the wallet a little more.
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