Best & Worst Stocks of 2012: Homebuilders Rule, PCs Drool

by Dan Burrows | December 4, 2012 1:08 pm

It was another white-knuckle ride, but 2012 is shaping up to be a solid year for equity investors. We’re down to fewer than 20 trading sessions left on the year, and the market is poised for double-digit gains.

But, as always, drilling down into the S&P 500 reveals a market of haves and have-nots. If you indexed to the S&P 500, you enjoyed a price return of 12.1% for the year-to-date through Dec. 3. If we can just hold on to those gains, well, that’s a great year for stocks.

On a sector basis, the most outsized market-beating performance has been found in financials and consumer discretionary stocks, which are up more than 20% on a price basis in 2012. Those are crazy-good returns.

On the other side of ledger, the biggest laggards have been utilities, which are off 3.3%, and energy stocks, which are up just 1.2%.

Interestingly, when it comes to outperformance on the part of stock-pickers, it was all about housing. Indeed, three of the top five stocks in the S&P 500 this year are housing plays, as two homebuilders and a major appliance maker put up some of the most massive returns.

Here are  best-performing stocks in the S&P 500 through Dec. 3:

  1. PulteGroup (NYSE:PHM[1]) 169%
  2. Sprint Nextel (NYSE:S[2]) 144%
  3. Whirlpool (NYSE:WHR[3]) 113%
  4. Expedia (NASDAQ:EXPE[4]) 109%
  5. Lennar (NYSE:LEN[5]) 92%

Homebuilders PulteGroup and Lennar are among the market leaders, and it’s easy to see why. More than six years after the housing bubble burst, that market has finally stabilized. Home prices rose for their eighth straight month in October, CoreLogic said Tuesday, increasing by their greatest amount since June 2006.

That’s just the latest news in a steady stream of data pointing to more upside ahead for homebuilders and related stocks[6] like Whirlpool, another top stock of 2012 and a top holding of the S&P Homebuilders SPDR ETF (NYSE:XHB[7]).

Meanwhile, the worst-performing stocks illustrate everything from the crushing effects of the student-debt crisis on for-profit education companies to the creative destruction of the rise of tablets and mobile computing.

Here are the worst-performing stocks in the S&P 500 through Dec. 3:

  1. Apollo Group (NASDAQ:APOL[8]) -65%
  2. Advanced Micro Devices (NYSE:AMD[9]) -56%
  3. Cliffs Natural Resources (NYSE:CLF[10]) -55%
  4. J. C. Penney (NYSE:JCP[11]) -51%
  5. Hewlett-Packard (NYSE:HPQ[12]) -50%

Apollo has been clobbered by the crackdown on student loans in the for-profit education sector, while Cliff’s Natural Resources has been hurt by slumping prices for iron ore.

Meanwhile, Penney’s woes, which have been well-documented[13] by InvestorPlace, show the wisdom of Warren Buffett, who says the problem with most turnarounds is that they don’t turn.

The same may be said for HPQ[14] and AMD. The irresistible rise of tablets and mobile have dumped PC sales into the gutter, leaving these two former tech stars out it the cold, too.

True, after such dismal returns, there’s no doubt some folks will be swinging for the fences in 2013 by doubling down on such pummeled shares — but we wouldn’t join them. By the same token, it’s also highly unlikely that the top stocks will put up a repeat performance of double-digit returns.

Which just goes to show how dangerous stock-picking really is.

If you were clairvoyant enough to predict a year ago that, say, Sprint would go ballistic, well, good for you. But remember that the S&P 500 has put up a 14% total return for the year-to-date with far, far less risk — and that should be more than sufficient for any serious long-term investor.

Although it may not feel like one, it’s been a great year for the stock market.

As of this writing, Dan Burrows did not hold positions in any of the aforementioned securities.

  1. PHM:
  2. S:
  3. WHR:
  4. EXPE:
  5. LEN:
  6. more upside ahead for homebuilders and related stocks:
  7. XHB:
  8. APOL:
  9. AMD:
  10. CLF:
  11. JCP:
  12. HPQ:
  13. have been well-documented:
  14. same may be said for HPQ:

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