While using performance lists to generate investment ideas for 2014 can be a dicey prospect — as those who invested in gold miners and coal stocks after their poor 2012 can attest — it still can provide a starting point for identifying stocks that may be over- or undervalued.
Finding meaningful data on the best and worst performers in the S&P 500 Index for a given year can be a challenging task. With that in mind, the tables below present sector performance as well as the most notable winners and losers in the index during 2013.
2013 S&P 500 Sector Performance
| Sector | 2013 Total Return |
| S&P 500 Index | 32.40% |
| Consumer Discretionary | 43.11% |
| Healthcare | 41.39% |
| Industrials | 40.68% |
| Financials | 35.61% |
| Information Technology | 28.49% |
| Consumer Staples | 26.14% |
| Materials | 25.78% |
| Energy | 25.06% |
| Utilities | 13.21% |
| Telecommunications Services | 11.47% |
These results should come as no surprise to anyone who kept an eye on the markets in 2013. The three sectors known for stable earnings and high dividends — staples (XLP), utilities (XLU) and telecommunications (IYZ) — all lagged in the environment of rising bond yields, improving growth, and investors’ hearty appetite for risk. At the same time, materials (XLB) and energy (XLE) — each of which were exposed to the weakness in commodity prices — delivered excellent total returns but nonetheless failed to keep pace with the broader market.
On the other side of the equation, the most economically sensitive sectors — industrials (XLI), consumer discretionary (XLY), and financials (XLF) — all finished ahead of the broader market. The outperformance of healthcare stocks (XLV) might seem counterintuitive given the preference for more aggressive, cyclical sectors, until a look under the surface shows that the strong rains of biotechnology stocks more than offset the softer performance of pharmaceuticals.
Top 20 S&P 500 Stocks of 2013
| Stock | Ticker | 2013 Total Return |
| Netflix | NFLX | 297.63% |
| Best Buy | BBY | 244.21% |
| Micron Technology | MU | 243.06% |
| T-Mobile US | TMUS | 152.17% |
| Delta Air Lines | DAL | 132.59% |
| Pitney Bowes | PBI | 132.00% |
| E*Trade Financial | ETFC | 119.44% |
| Celgene | CELG | 115.33% |
| Boston Scientific | BSX | 109.77% |
| Genworth Financial | GNW | 106.79% |
| FB | 105.30% | |
| Gilead Sciences | GILD | 104.49% |
| Yahoo! | YHOO | 103.22% |
| GameStop | GME | 102.49% |
| Lincoln National | LNC | 102.16% |
| Hewlett-Packard | HPQ | 101.11% |
| Western Digital | WDC | 100.80% |
| Constellation Brands | STZ | 98.87% |
| Sealed Air | SEE | 98.37% |
| TripAdvisor | TRIP | 97.59% |
One notable aspect of the list of 2013 winners is that many were among the worst performers of 2012. Even as the S&P gained over 15%, Best Buy (BBY) and Hewlett-Packard (HPQ) each lost over 40%, while Pitney Bowes (PBI) fell 36%, and Micron (MU), GameStop (GME), E*TRADE (ETFC) and Yahoo! (YHOO) were essentially left for dead at various points during the year. Easy monetary policy and improving economic growth clearly put investors in a forgiving mood during 2013.
Bottom 20 S&P 500 Stocks of 2013
| Stock | Ticker | 2013 Total Return |
| JCPenney | JCP | -53.58% |
| Newmont Mining | NEM | -48.51% |
| Cliffs Natural Resources | CLF | -30.37% |
| Abercrombie & Fitch | ANF | -30.04% |
| Edwards Lifesciences | EW | -27.07% |
| Teradata | TDC | -26.50% |
| Peabody Energy | BTU | -25.34% |
| Intuitive Surgical | ISRG | -21.68% |
| FirstEnergy | FE | -16.53% |
| HCP | HCP | -15.78% |
| Mosaic | MOS | -14.91% |
| CenturyLink | CTL | -13.17% |
| ADT | ADT | -11.94% |
| Diamond Offshore | DO | -11.85% |
| AvalonBay Communities | AVB | -9.84% |
| Broadcom | BRCM | -9.40% |
| Health Care REIT | HCN | -8.42% |
| Jabil Circuit | JBL | -8.18% |
| Newfield Exploration | NFX | -8.03% |
| Ventas | VTR | -7.64% |
Are any of these losers poised to be the Hewlett-Packard of 2014?
All of these names are inherently risky given that they managed to lose ground even as the broader market posted its best return since 1997. But for those in the market for a potential lottery ticket, Newmont Mining (NEM) might be an interesting as spring approaches. The stock’s 49% loss in 2013 comes on the heels of a 20% downturn in 2012, which puts it nearly $50 below its high of $72 and change in December 2011. With 2013 earnings estimates on the upswing, the risk-reward profile has become more favorable. Look for a chance to buy this name for a recovery if gold washes out below the bottom it established in June.
The 20 Largest S&P 500 Stocks, 2013 Total Returns
| Stock | Ticker | 2013 Total Return |
| Apple | AAPL | 8.06% |
| Exxon Mobil | XOM | 20.14% |
| General Electric | GE | 37.89% |
| Microsoft | MSFT | 44.28% |
| Johnson & Johnson | JNJ | 34.62% |
| GOOG | 58.43% | |
| Chevron | CVX | 19.32% |
| Procter & Gamble | PG | 23.69% |
| International Business Machines | IBM | -0.18% |
| Pfizer | PFE | 26.22% |
| Berkshire Hathaway | BRK.B | 32.17% |
| JP Morgan Chase | JPM | 36.71% |
| Wells Fargo | WFC | 36.71% |
| AT&T | T | 9.76% |
| Coca-Cola | KO | 17.23% |
| Phillip Morris International | PM | 8.50% |
| Citigroup | C | 31.84% |
| Bank of America | BAC | 34.51% |
| Verizon Communications | VZ | 18.64% |
| Merck | MRK | 26.80% |
| Bold text indicates outperformance | ||
Aside from the loss for IBM (IBM), one of the most interesting aspects of this list is the impact of Apple. As strong as the returns were for the S&P 500 Index in 2013, they could have been even better if Apple (AAPL) had kept pace with the market. Since Apple is such a large weighting in the index — 3% on average in 2013 — a return equal to the 32.4% gain of the S&P 500 would have tacked another 0.74 percentage points onto the index return. Granted, this would have required buying that might have drawn interest away from other stocks in the index.
Still, it helps indicate that the “Apple effect” on index performance remains alive and well as we enter 2014.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.
