It may not feel like it these days, but stocks are technically still in a bull market. Indeed, Wednesday marks the seven-year anniversary of the bull run.
As much as everything feels uncertain now, back then it was much, much worse. With a more than 50% drop from its peak, the S&P 500 hit its recession low of 676.53 on March 9, 2009.
But there was no way to know the worst was over for stocks.
After all, the severe economic downturn would last for another three months (see how stocks are forward looking?) Investors couldn’t believe that the bottom might be in.
Little did they know that it was the buying opportunity of a lifetime.
Well, naturally Warren Buffett did. He bought shares in his favorite companies all the way down.
If you emulated Buffet and dollar-cost averaged your way through the crash, take a bow. That’s exactly the right thing to do. The Oracle of Omaha would be proud.
However, if you somehow market-timed and stock-picked the moment perfectly — a fantasy call if ever there was one — you would have reaped jaw-dropping returns.
Get this: if you had bought only the top three of the best mega-cap stocks of the bull market, you’d have a gain of 724%, according to S&P Capital IQ.
So who are these three big-cap, bull-market killers? Let’s have a look.
Best Stocks of the Bull Market: Home Depot Inc (HD)
HD Market Cap: $160 billion
Change Since Bear-Market Bottom: 595%
This one is probably too obvious. The housing crisis is what brought pain to the market in the first place, and Home Depot Inc (HD) was butt-naked exposed to it.
From their pre-bubble peak in 2005, shares in the nation’s largest home improvement retailer tumbled 60% before the current bull market kicked in.
There’s little wonder why. The fundamentals were terrible. In 2009, earnings fell almost 40% year-over-year.
That sort of thrashing can help spring-load a stock for a big rebound, and that’s what HD delivered. The easy money, however, appears to be made.
An improving housing market has been largely factored into the stock price by now. HD remains a good bet on a better U.S. economy, but it’s probably too much to ask for another 595% gain in the next seven years.
Best Stocks of the Bull Market: Apple Inc. (AAPL)
AAPL Market Cap: $560 Billion
Change Since Bear-Market Bottom: 751%
One word: iPhone. That revolutionary gadget more than anything else has propelled Apple Inc. (AAPL) through an amazing bull market run. And that’s despite AAPL being in a year-long slump.
Don’t forget that not too long ago, AAPL’s market cap had $800 billion in its sights. Indeed, from the bear-market bottom to Apple stock’s all-time peak a little more than a year ago, shares were up 1,000%
But AAPL stock’s growth profile has changed a lot since those days. Investors are worried that it has lost its iPhone mojo, that it’s too big to grow quickly and that Tim Cook is no Steve Jobs.
Maybe so, but those fears are overblown if you measure by AAPL stock’s valuation. It’s a deep bargain on a forward earnings basis. At current levels, Apple doesn’t have to produce rocket growth to justify an investment.
Best Stocks of the Bull Market: Amazon.com, Inc. (AMZN)
AMZN Market Cap: $261 billion
Change Since Bear-Market Bottom: 824%
Amazon.com, Inc. (AMZN) is the best performing mega-cap stock of the bear market by a wide margin.
Bears will point to the fact that it has done so while generating intermittent profit growth, and bulls will rightly point out that that just doesn’t matter.
Over the last seven years, AMZN has solidified its overwhelming superiority in e-commerce. It has developed a strong position in streaming media and content creation. Best of all, the company’s cloud-based services business is a whopper that’s just starting to take off.
AMZN stock looks pricey on a forward earnings basis, but not if you believe in its growth prospects. Pundits criticize CEOs for short-term, quarter-to-quarter thinking. Amazon CEO Jeff Bezos is thinking in decades.
On that time frame, AMZN is almost assuredly a bargain.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
