The first half of 2015 has been very eventful for investors from a headline perspective. There’s continued drama out of Greece in Europe, talk of a bubble in China after equities have raced to new highs there, and an overall feeling of uncertainty in the U.S. as the Federal Reserve debates raising interest rates.
For all the clicky stories out there, it seems Wall Street is pretty subdued.
As the old saying goes, however, it is a market of stocks and not just a stock market. And investors who have been in a select group of stocks have enjoyed big-time gains in the first six months of the year — including one popular consumer brand that has roughly doubled since January!
So what are the best stocks in the S&P 500 so far, and what’s their outlook for the second half? Let’s take a look:
Best Stocks in the S&P 500 (#10): Newfield Exploration (NFX)
Market Cap: $6.1 billion
Sector: Energy exploration and production
YTD Performance: +36%
Newfield Exploration Company (NFX) is an energy company that has defied expectations as other oil and gas stocks have been slammed amid weak energy prices.
Of course, some of this is a trick of timing. At just under $37 a share currently, Newfield still is below its mid-2014 peak of more than $45, even if it has snapped back from lows at the start of the year. However, as crude oil prices have stabilized and moved higher, things have undeniably been better for NFX stock since January.
Of course, the story is a bit less impressive over the last few months as Newfield has flatlined along with crude oil. And given Saudi Arabia’s commitment to flooding the market with cheap oil, it’s unlikely that the snap-back and stability we’ve seen in NFX will be followed by another leg up.
A well-timed buy in Newfield would have made you a nice gain to start the year, but current investors shouldn’t expect a repeat performance in the second half of 2015.
Best Stocks in the S&P 500 (#9): Kraft (KRFT)
Market Cap: $51.4 billion
Q1 Performance: +38%
Kraft (KRFT) exploded a few months ago on reports of a merger with fellow consumer icon Heinz. While packaged-food companies have been quite sleepy and mostly overlooked in recent years, the marriage of these two giants was big news — particularly given the stake that investment icon Warren Buffett has in Heinz.
After a roughly 40% pop in one day, KRFT has drifted slightly higher, then lower. But regardless of what happens from here, investors shouldn’t fool themselves into thinking that there will be a counter-offer to the $40 billion proposal by Buffett and 3G Capital to purchase the foods giant. The premium is going to be very hard to match, and the idea of efficiencies of scale can really only be achieved by merging an equal like Heinz with Kraft.
In other words, if you owned KRFT for the long-term dividend potential, you got a great surprise with this buyout announcement in March. But if you don’t have a direct stake in Kraft, don’t expect much from this stock going forward.
Best Stocks in the S&P 500 (#8): Amazon (AMZN)
Market Cap: $204 billion
Industry: Online retail
YTD Performance: +41%
Amazon (AMZN) was on the outs with investors across all of 2014, but lately the stock has been fighting its way back into favor.
The first glimmers of hope were back in January, after Amazon posted strong Q4 earnings in January that showed — shocker! — an actual profit for the company. Revenues grew 15%, too, and investors bid the stock up by double digits on the news.
AMZN stock was pretty much stuck in a rut after that, however … at least until another slam-dunk earnings report in April. While the profits weren’t there this time, there was a very important disclosure about the all-important Amazon Web Services arm that has garnered so much attention.
In addition to finally getting details on this division, which is a big deal considering the historically secretive Amazon, the numbers themselves were objectively impressive. Revenue for AWS was up about 50% year-over-year to $1.57 billion on the quarter — putting the cloud division on pace for $6 billion in annual revenue.
When you have a rapid pace of expansion in a unit that accounts for about 7% of total sales, that’s a great sign for future growth — and investors have been driving AMZN stock higher as a result.
Best Stocks in the S&P 500 (#7): Hasbro (HAS)
Market Cap: $9.7 billion
YTD Performance: +41%
Toy company Hasbro (HAS) has been quietly climbing higher since 2013 in the wake of a restructuring that seems to have yielded big dividends. After laying off about 10% of its workforce to cut costs, the company also has been riding success after reconnecting with consumers by way of its key brands.
Transformers toys are in demand thanks to the successful movie franchise, the revamped My Little Pony line of toys hit $1 billion in sales last year as the animated series trots through its fifth season, and an ambitious effort to rebrand Monopoly with real-world places (voted on by Internet ballot) has seen initial success.
Of course, the fact that the economy is healing also has helped as consumers have more money to spend at the toy store.
It all adds up to five consecutive quarters of year-over-year revenue growth and a steady upward climb in earnings that has Wall Street enthusiastic about this toy stock right now.
Best Stocks in the S&P 500 (#6): Electronic Arts
Market Cap: $21 billion
Industry: Video games
YTD Performance: +43%
Electronic Arts (EA) was one of the best stocks in the S&P 500 across all of 2014, more than doubling last year thanks to a host of strong titles. Better-than-expected results for Battlefield 4 as well as a partnership with Microsoft Corporation (MSFT) to provide hit EA titles directly to Xbox users sparked big optimism, and big gains for shareholders.
The trend has continued in 2015 in part because of a strong showing at the Electronic Entertainment Expo (E3), and optimism on Wall Street about how sales will fare for the rest of the year. Throw in strong success for lines like Madden football games and PGA Tour golf, and there are a lot of reasons to like what EA has to offer right now.
Consider that Brean Capital, which already had a “buy” rating on EA stock, recently raised its price target from $66 to $75 a per share. At the same time, Jefferies also upgraded EA to “buy,” with a new price target of $80 above its old target of $58.
That’s 10% to 20% additional upside from current levels, showing just how confident investors are that this run will continue.
Best Stocks in the S&P 500 (#5): Hospira (HSP)
Market Cap: $15.3 billion
YTD Performance: +45%
Hospira (HSP) was named the top performer in the S&P 500 through Q1 after popping more than 40% on buyout news … but there isn’t really much to report since then. Pharma giant Pfizer (PFE) offered up a $17 billion buyout plan in February for the stock, and after an initial pop, HSP stock has essentially flat-lined as investors wait for the deal to be finalized.
Pfizer was particularly interested in the injectable drug company’s so-called “biosimilars,” which are treatments that perform comparably to existing medications despite being a different drug altogether. As a company facing the expiration of some key patents — including top sellers Celebrex and Lipitor that just lost exclusivity — PFE badly needs a new (pardon the pun) injection of options.
As I noted three months ago, if you don’t already have a stake in HSP stock, you’ve missed out on the potential of this deal.
Shares are bouncing around by a few pennies in the $88-to-$89 range and will continue to do so until the deal closes. But it’s highly unlikely there’s much upside left in the wake of this big-ticket buyout announcement from early 2015.
Best Stocks in the S&P 500 (#4): Skyworks Solutions (SWKS)
Market Cap: $20.8 billion
Industry: Integrated circuits
YTD Performance: +48%
Skyworks is a key supplier to the iPhone 6, and the big success of the gadget has meant big sales for SWKS as a result. As a result, revenue is expected to soar 40% in 2015 and profits will be up about 60% on the calendar year.
Now, there is no guarantee that the iPhone contracts will be as cushy for SWKS in 2016 as they were this year. However, given the major revamp of the smartphone line last year to include the larger screen size, it’s unlikely any major changes will be in the works — particularly how challenging it has been for Apple to manage its supply chain thus far.
Also, there is no guarantee the iPhone will be as big of a hit in the next year as it was after its super-sized relaunch in 2014.
But if history has shown investors anything, it’s that betting against Apple stock can be bad news … and the same could be true for suppliers like Skyworks, particularly after a red-hot run like the one this stock has seen year-to-date.
Best Stocks in the S&P 500 (#3): Aetna (AET)
Market Cap: $46 billion
Industry: Health insurance
YTD Performance: +49%
Aetna (AET) is a major health insurance company that has quietly been expanding its business at a steady clip for some time. Projected revenue for 2015 is more than $61 billion, up 29% from $47.3 billion in 2013 and up 6% year-over-year, with earnings marching higher at an even more impressive clip.
And if that’s not enough for you, at the end of June, Aetna was rumored to be close to buying out fellow insurer Humana (HUM). Such a move surely won’t happen overnight, but AET stock has gapped up by double digits on the reports anyway in anticipation of a big expansion in scale.
A recovering economy and more people on the job means more people with employer-sponsored health insurance through companies like Aetna. At the same time, the continued success of the Affordable Care Act means more “customers” in government-sponsored marketplaces for private insurance.
Throw in the prospect of consolidation in the space with mergers like the proposed Humana deal, and it’s no surprise why AET stock has put on a great show in 2015.
Best Stocks in the S&P 500 (#2): Cigna (CI)
Market Cap: $43 billion
Industry: Health insurance
YTD Performance: +60%
It’s hard to imagine a large-cap health insurance company as a high flier, but Cigna (CI) takes one of the tops spots on the list of S&P 500 performers across the first half of the year thanks to buyout talks.
To be clear, Cigna has thus far rebuffed efforts from Anthem (ANTM), but reports indicate that some kind of consolidation is on the way, as other companies like UnitedHealth Group (UNH) and the aforementioned Humana and Aetna have also been involved in negotiations of their own.
It’s worth noting, too, that it’s not just buyout premiums and Obamacare that are in play here. The fact is healthcare is one of the few recession-proof sectors, with built-in demand that will stay robust across any economic condition, and many investors are attracted to the stable nature of the sector right now.
That bodes well not just for buying pressure behind stocks like Cigna in the second half of 2015, but also stability in the long term no matter what happens for the rest of the year.
Best Stocks in the S&P 500 (#1): Netflix (NFLX)
Market Cap: $40.4 billion
YTD Performance: +92%
Streaming video giant Netflix (NFLX) recently announced a 7-for-1 stock split, cutting down the high per-share price of this momentum darling. But a cheaper share price after the move doesn’t negate the fantastic performance of NFLX stock recently.
Bears will say that Netflix has probably run up too much, considering it’s up 90% since January and is up an even more impressive 650% since January 2013. And admittedly, NFLX stock boasts a price/sales ratio of over 7 and a forward price-to-earnings ratio of more than 200 based on 2016 forecasts.
However, growth is difficult to come by in this market, and it’s undeniable that Netflix is not just dominant but increasing in size. Consider April earnings, which saw NFLX stock gap up about 25% in just a few days after reporting a 24% surge in revenue. This run came even as Netflix slightly missed its profit forecasts, showing that Wall Street is more than willing to forgo short-term profit growth for long-term scale and success.
Who knows what’s next for Netflix after this amazing run, but one thing is sure: Volatility is the norm in a momentum stock like this, so investors on either side of the trade should buckle up and expect lots of fireworks in the second half of 2015.
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 did not hold a position in any of the aforementioned securities.