When data analyst powered by artificial intelligence (AI). Palantir Technologies (NYSE: PLTR) joined S&P 500 on September 23, investors cheered. The share price has risen more than 50% since then, including a huge spike the day after the Nov. 5 national election.

Can it last?

Some investors believe that membership in the S&P 500 gives stocks a floor: a foothold between index funds and other institutional properties that helps protect their investment. I wanted to see if it was true. What we found was truly shocking and has serious implications for Palantir in the year ahead. It also offers some hope to investors who worry they missed the boat on this hot AI stock.

It crashes through the floor

I looked at the 14 stocks that joined the S&P 500 between one and two years ago (so November 14, 2022 to November 14, 2023) and tracked their prices for the year after their official introduction, and if there was a “slump” it seemed to be well below the price their closing price on the day they officially joined the S&P 500 (I’ll call this their “induction price”).

In the year since the S&P 500’s inception, all 14 stocks have seen at least one drop below their induction price. Droplet size varied greatly. Better performing fintech company Beautiful Isaac decreased by only 1.5%, while Islet Corp. had a stomach drop of 58.5%. Finally, 11 of the 14 stocks, or 79%, saw at least a decline of 10% or more below their induction price in the first year. These drops are in bold in the center column below:

Notes: * The percentage change marks the largest decrease since the date of introduction. Figures in bold are those that have decreased by 10% or more. ** Marks percentage change from date of introduction.

Besides Fair Isaac, only two companies avoided a double-digit percentage decline: spinoffs GE Healthcare the manufacturer of industrial electrical components also fell by 4% Hubbell decreased by about 6%. Seven stocks (more than half of the participants) fell 20% or more.

So if you’re wondering if you’ve completely missed the boat on Palantir, history suggests you may soon see a buying opportunity.

Not just cherry picking

Was this just a particularly bad year for S&P participants? Unfortunately, no. There are similar trends in other recent years.

In 2022, for example, the S&P 500 fell nearly 20% as a whole, sweeping most of its member companies with it. Recent additions have fared no better: Erie allowancean insurer that went public on the same day as Palantir, has already seen its stock drop 22.9% below its induction price. The only exception I found in recent years was the finance company Arch Capital Groupwhich was introduced on November 1, 2022 and has never fallen below the induction price since then.

As you may have noticed, these drops don’t seem to follow a pattern. These companies represent a wide range of industries. As you can see in the chart, they were introduced at different times throughout the calendar year, and the biggest drop below their induction price sometimes happened almost immediately, sometimes several months later. Even their valuations (price-to-earnings and price-to-sales) were all over the place! There seemed to be no way to tell which ones would underperform, only that most would.

In fact, as the last two columns of the table show, only six of the 14 stocks outperformed the S&P 500 after a year in the index: Fair Isaac, GE Healthcare and Hubbell (the three that posted only single-digit declines from their induction price) plus Palo Alto, capital manager Blackstoneand taser maker Axon Enterpriseeach of whom was able to climb out of his hole by double digits.

This means that buying shares of an S&P 500 index fund is usually a better bet than buying shares in new entrants. But what does this say about Palantir specifically?

Pride before the fall

Stocks that saw a slow but steady increase in share price immediately after the S&P 500’s introduction — such as Fair Isaac and GE HealthCare — were less likely to suffer the kind of big decline that knocked their shares below their induction, but the sample size is small. On the other hand, companies that have seen big, uneven jumps — such as Lululemon Athletica or Palo Alto — they’re more likely to see big drops as well… and that’s the kind of growth we’ve seen from Palantir since the induction.

Given Palantir’s skyrocketing current valuation and fortuitous growth trajectory, I wouldn’t be surprised to see the stock price drop sometime in the next year, presenting a better buying opportunity for hesitant investors. Having said that, I think the company is likely to succeed in the long run. However, there are more attractive buys on the market right now that don’t have a track record working against them.

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John Bromels has positions in Lululemon Athletica. The Motley Fool has positions in and recommends Axon Enterprise, Blackstone, GE HealthCare Technologies, Lululemon Athletica and Palantir Technologies. The Motley Fool recommends Fair Isaac, First Solar, Insulet and Palo Alto Networks. The Motley Fool has a disclosure policy.