By Paul R. La Monica

If you own Sandisk, Western Digital, or Micron Technology 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, looked at what happens after a stock doubles in price over a short period -- 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.

It's small-caps you need to really worry about. Though forward returns for large-caps after a doubling were "generally weak," the 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-caps fall gradually, you don't need to rush for the exit. Two examples are Lumentum Holdings and Ciena. 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, Advanced Micro Devices, 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, oil exploration firm APA, and Dow component Caterpillar.

While nothing works all the time, there are general rules that can be followed. If a stock has doubled -- particularly quickly -- it's best not to chase the returns, at least not immediately. If you own a small-cap stock that has doubled quickly, it's probably time to sell.

And if you're not sure what to do, there's nothing wrong with selling a piece of the position and holding the rest. That way, if it goes down, at least you took some profits, and if it goes up, at least you still hold some shares.

And don't forget to be thankful that you were smart enough to catch a double in the first place.

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

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April 10, 2026 12:07 ET (16:07 GMT)

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