By Paul R. La Monica

If you own Sandisk, Western Digital, or Micron stock, congrats.

They -- and any number of other red-hot AI momentum plays -- have more than doubled in the past year. Now, for a dose of reality: Companies that enjoy a huge pop end up limping along for years.

That's the conclusion of an analysis of the past 40-some years by Renaissance Macro Research, or RenMac. The firm's Rafael Sanhueza, a technical researcher, and Jeffrey deGraaf, chairman and head of technical research, took the deep dive.

Sanhueza and deGraaf looked at what happens after a stock doubles in price over a short period of time -- anywhere from 10 to 252 trading days. They studied "bubble events" for companies in the Russell 3000 index, from 1984 to this year.

What they found was something we've all heard before: What goes up must come down.

"Across large-cap, small-cap, and broad-market universes, stocks that double rapidly tend to underperform over the subsequent 36 months," they wrote.

Still, you probably don't need to worry as much about a sudden collapse of momentum of a large-cap as a small-cap.

Though forward returns for large-caps after a doubling were "generally weak," they researchers wrote, smaller-caps showed "more abrupt and severe declines."

Sanhueza and deGraaf also warned there are dangers in betting against momentum stocks. Stocks that have doubled can keep climbing.

"The implication is not that one should mechanically short every stock that doubles," they wrote.

Given that large-cap fall gradually, you don't need to rush for the exit. Two examples are Lumentum Holdings and Ciena Corp. Lumentum has more than doubled this year and has gained nearly 1,100% in the past 12 months. Ciena is up about 85% this year and has climbed almost 600% in the past 12 months.

In the S&P 500 index, 24 companies have shot up more than 100% in the past 12 months. Many, but not all, are in the tech sector. Chip and semiconductor equipment companies Intel, AMD, Applied Materials, and KLA-Tencor are on the list. A few of the non-tech names that have more than doubled include gold miner Newmont Corp., oil exploration firm APA Corp. and Dow component Caterpillar Inc.

So, what to do? We can't say sell or hold. But what we can suggest is that now you know, watch these holdings like a hawk. If momentum starts to fade, it might be time for a trim -- at least.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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April 06, 2026 12:47 ET (16:47 GMT)

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