by Jeff Reeves | September 24, 2012 7:20 am
Well, despite some of the negativity that exists on the macro side of things — including a China slowdown, growing bearish sentiment among investors, the mess in Europe, and continued sluggishness at home on the consumer and jobs front (I recently wrapped up 11 signs the rally is stalling in a separate column if you want the gory details) — the markets continue to plod higher.
As of this writing, the Dow is up over 10%, the S&P 500 is up about 17% and the Nasdaq is up a whopping 23% year-to-date since Jan. 1.
Those are impressive gains that can’t be argued with. But even more impressive are some of the top performers in these benchmark indices. There are blue chips out there that have delivered three, four and even five times the returns!
So what are these picks? Here’s a list of the large caps in the S&P 500 that have trounced the market year-to-date, with returns ranging from 72% to a whopping 164% since Jan. 1.
YTD Performance: +72%
What’s not to like about Apple (NASDAQ:AAPL)? The tech stalwart has blown the doors off again thanks to its surging iPad tablet sales and the anticipation over the iPhone 5.
That anticipation appears to be well-founded, since iPhone 5 preorders sold out in an hour and 2 million of the gadgets were sold in the first 24 hours to set a new record.
Apple has a lot more going for it, too — the iPad’s dominance of the tablet space, its crucial role in digital media like movies and music via the iTunes store, and a powerful brand that has kept margins big even as consumer spending remains relatively weak.
And with a P/E of around 13 right now and its first-ever dividend instated this year, there are reasons to expect Apple will hang tough through the end of the year and into 2013.
YTD Performance: +75%
D.R. Horton (NYSE:DHI) is the first of a few homebuilding stocks that have blown up in 2012 thanks to what looks like a bottoming in the U.S. housing market. A host of data points have shown that housing is looking up, and a bunch of favorable earnings reports from leading builders indicate that business is picking up.
Take the Aug. 22 report from Toll Brothers (NYSE:TOL) that showed a 57% surge in contracts and a 59% increase in deposits on future contracts. Toll is a luxury homebuilder targeting those making $100,000 a year or more, but the movement still is impressive.
D.R. Horton had some pretty impressive earnings itself for its third quarter, with earnings per share jumping from just 9 cents in Q3 of 2011 to a whopping $2.22 this year! Considering full-year estimates were for just 68 cents total, this performance really caused a stir.
Investors have been piling into DHI and other builders as a result of this seeming turnaround.
YTD Performance: +76%
Banking stocks have enjoyed a bit of a renaissance in 2012, with much-maligned stocks like Bank of America (NYSE:BAC) and Citigroup (NYSE:C) actually outperforming the market significantly this year. But regional banks in particular have been very strong and have powered the financial sector to new highs.
Regions Financial (NYSE:RF) is one of the largest regional banks out there, with a nearly $11 billion market cap and more than 1,700 locations across the south and southeast.
RF has been in tough shape, recording losses for each of the past four fiscal years as it has struggled to rebuild capital levels and credit quality. Its loan portfolio in many ways was as bad or worse as the big boys thanks to very high unemployment and crashing housing prices particular to the areas that Regions serves. South Carolina, Georgia and Mississippi all boast 9%-plus rates of joblessness.
But RF is on track to turn a profit at long last for fiscal 2012 and seems to be turning things around. That message of hope has resonated with investors, who have bid up the stock strongly year-to-date.
YTD Performance: +78%
With energy prices relatively soft and crude oil struggling to challenge the $100-per-barrel level, you wouldn’t think that this sector would be booming. But in fact, it’s not — with majors like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) slightly underperforming year-to-date in 2012.
Tesoro (NYSE:TSO) is a different story, however. This mid-cap refiner operates in the western U.S. and turns crude into gasoline, diesel fuel, jet fuel and other products. It also sells the gas at some 1,175 retail outlets.
A lot of Tesoro’s gains have come in August, after a refinery fire at a Chevron refinery limited production and made TSO facilities in huge demand. Further stoking gains was news that Tesoro would be buying a California refinery from BP (NYSE:BP), along with about 800 gas stations in the region. Experts predicted this could boost earnings per share by roughly 25%.
So while oil prices might not be soft, circumstances and a shrewd acquisition pushed Tesoro to the head of the pack.
YTD Performance: +78%
Whirlpool (NYSE:WHR) is one of the most recognizable appliance manufacturers in America, but it’s also a global powerhouse that operates all over the world.
Whirlpool saw much better days back before the recession when consumer spending was strong. However, revenue has finally started to challenge fiscal 2008 levels once again. And more importantly, profits actually have been keeping pace, too, despite softer international sales.
In fact, U.S. sales are so brisk that in February, WHR reported a 20% jump in profits thanks to cost-cutting, and the company boosted its fiscal 2012 forecast as a result. That higher outlook was reaffirmed this summer, and the company is on track for a very strong year.
It’s also worth noting that a secular recovery in housing could bode well for Whirlpool, as folks with new places to live might be buying new appliances to go in them.
YTD Performance: +83%
It’s the post-PC age, and many “old tech” giants are suffering as a result. Case in point: Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) are both continuing their slow march to irrelevance, as measured by slumping stock prices and fading earnings.
So you might be surprised to see that one of the biggest hard disk drive makers in the world, Seagate Technology (NASDAQ:STX), is one of the top performers this year. In fact, Seagate stock is above its pre-recession highs.
The surge comes from a convergence of low expectations (STX stock had crashed to lows of about $10 as recently as a year ago) and easier year-over-year comparisons (flooding in Southeast Asia, where Seagate makes many disk drives, severely limited production and profits in 2011). Investors have been thrilled with the stock as it just finished its fiscal 2012 with a whopping $6.49 in earnings per share, compared with just $1.09 in fiscal 2011.
The million-dollar question, of course, is whether Seagate can keep this up. The secular trend weighing on old technology makers is big, but the P/E of the company remains less than 5 right now, which could keep STX looking attractive to the value crowd.
YTD Performance: +86%
Another homebuilder on this list is Lennar (NYSE:LEN). Like the aforementioned D.R. Horton (NYSE:DHI), this company has benefited from the perception of a bottom in housing and a strong rebound in its fundamentals.
Consider it just reported EPS of $2.06 for its fiscal Q2, when previous forecasts were for roughly 97 cents a share for the current fiscal year. That’s certainly reason for investors to be enthusiastic.
It’s also worth noting that new housing starts and existing home sales both rose in August, and pricing remains firm nationwide. So this trend could very well continue into 2013 if you believe a housing bottom has been established.
It adds up to a favorable environment for DHI, Lennar and other builders and has resulted in outsized performance year-to-date.
YTD Performance: +97%
Expedia (NASDAQ:EXPE) is an online travel company, and many investors are a bit surprised to see this kind of consumer-oriented pick boasting such mammoth gains. But the strength of Expedia actually comes from its bargain branding that connects with cost-conscious travelers.
That, coupled with a mammoth operation that spans 25 countries and is growth strong, has allowed EXPE to find big profits even in these tougher times. Also, the wildly successful spinoff of TripAdvisor (NASDAQ:TRIP) — of which Expedia still owns a nice stake — has allowed the company to find revenue from travel news and reviews, too.
Revenue is set to triple fiscal 2009 numbers this year, and profits will be easily more than double. That’s impressive considering the macro challenges, and investors like what they see.
YTD Performance: +132%
Sprint (NYSE:S) is the third wheel of the U.S. telecom space, behind duopoly AT&T (NYSE:T) and Verizon (NYSE:VZ). But lately the stock has been putting its bigger rivals to shame, at least on a share price basis.
That’s because Sprint has tallied more than a doubler in 2012.
As for why … well, frankly I don’t think it’s responsible to venture a guess. I personally believe that Sprint is not a company to be dealt with based on fundamentals, since it hasn’t turned a profit since 2007 and is projected to bleed cash until fiscal 2014. Furthermore, its single-digit stock price means it’s fodder for high-frequency trading algorithms and can whipsaw the stock around like crazy on no news.
Not trying to scare you, folks, but my two cents is that this is a trick of sentiment and not of strength in the underlying stock. That’s good on the way up — but can be painful on the way down.
YTD Performance: +164%
Once again, we turn back to the homebuilding sector. This time its PulteGroup (NYSE:PHM), which has soared a staggering 164%.
Pulte’s fundamentals aren’t as impressive as the other companies listed earlier, but the big reason for the turnaround here is that PHM stock was brutalized worse than many of its peers — and in fact, had been bleeding cash every quarter save one dating all the way back to 2007! But finally, in its most recent earnings report, PHM returned to profitability and forecast its first full-year profit since before the mortgage meltdown.
Granted, the stock still is down almost 50% from its 2007 highs and is roughly a third of where it was at its 2005 peak … but investors are now confident that PulteGroup has what it takes to survive.
The load off the back of PHM has resulted in a nearly 100% gain in the past three months alone, with new 52-week highs coming like clockwork.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via@JeffReevesIP. As of this writing, he owned a long position in Apple.
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