The 10 Best S&P 500 Stocks of Q3 2016

Two huge trends are driving most of the biggest outperformers this year

Source: Pixabay

When you look at the best stocks in the S&P 500 Index from New Year’s Day through the end of the third quarter, there really are only two trends that matter: the strength of technology companies, and the rebound in commodity stocks.

QuarterlyReviewOutlookMSNIn 2016, we have seen plenty of headlines. From a surprise slowing in the U.S. economy to start the year to the Brexit this summer to the Federal Reserve’s recent decision to stand pat on interest rates, there have been more than enough fireworks across the past nine months.

However, while there has been plenty of excitement in the headlines, most individual stocks seem stuck in a rather boring grind higher without serious dips and without serious legs higher. The S&P 500 has been remarkably stable, with August showing the least volatile 30-day stretch for the market in over 20 years.

If you’re lucky enough to own one of the best performing stocks of the S&P 500 this year, then, not only do you have outsize returns … but you also have a rare big-mover that seems increasingly hard to find in this market.

If you don’t own one of these stocks and are wondering what all the fuss is about, here’s a list of the top 10 performers since Jan. 1.

The Best S&P 500 Stocks, #10: Range Resources (RRC)

The Best S&P 500 Stocks, #10: Range Resources (RRC)Industry: Oil & Gas Exploration & Production
Market Cap: $6.3 billion
YTD Performance: 50% vs. 5% for the S&P 500

Range Resources Corp. (NYSE:RRC) is the first of many commodity-related plays that took it on the chin last year and has snapped back thanks to a turnaround in the price of oil, metals and other raw materials in 2016.

As the old saying goes, however, past performance is not indicative of future returns.

There continues to be downward pressure on independent oil and gas companies like RRC thanks to a global oversupply of energy and a challenging demand picture thanks to China’s slowdown and overall energy efficiency worldwide. Still, those who caught this bargain at the beginning of the year should be happy with their outperformance year-to-date.

After all, they’ve trounced the S&P 500 Index 10 times over.

The Best S&P 500 Stocks, #9: Freeport-McMoRan (FCX)

The Best S&P 500 Stocks, #9: Freeport McMoRan (FCX)Industry: Integrated Mining
Market Cap: $13.1 billion
YTD Performance:
51%

Commodity stock Freeport-McMoRan Inc. (NYSE:FCX) was left for dead by many investors at the end of 2015, when rumors of bankruptcy swirled and as the company struggled to manage its debt load.

However, while shares are still down about 80% from their 2012 highs, FCX stock has rebounded nicely from its lows about nine months ago thanks to cutting its debt and seeing improvement in the prices for its mineral assets such as copper and gold.

The future remains uncertain, but bold investors who bought the bottom in Freeport-McMoRan have been nicely rewarded in 2016.

The Best S&P 500 Stocks, #8: Urban Outfitters (URBN)

The Best S&P 500 Stocks, #8: Urban Outfitters (URBN)Industry: Retail
Market Cap: $4.1 billion
YTD Performance: 55%

Specialty retailer Urban Outfitters (NASDAQ:URBN) struggled mightily in 2015, crashing from a high of over $47 in March to a low under $20 in December.

The reasons were pretty simple: a challenging top-line environment in the age of e-commerce, fears the brand was losing its appeal with consumers and the bizarre decision to purchase a pizza chain (seriously).

However, shares have come back in 2016 as strong earnings reports have sparked big gains for the retailer and squeezed out the shorts.

The Best S&P 500 Stocks, #7: Computer Sciences (CSC)

The Best S&P 500 Stocks, #7: Computer Sciences (CSC)Industry: Technology Services
Market Cap: $7.26 billion
YTD Performance: 59%

Computer Sciences Corporation (NYSE:CSC) is a technology consultancy that aids businesses in their IT infrastructure, cloud computing access and data center management.

CSC has very much been in transition after a massive reorganization in late 2015 that included a spinoff of its public-sector consulting for government agencies — a separate business that trades under the name CSRA Inc (NYSE:CSRA). Then in May, CSC shot up after announcing a deal to merge with Hewlett Packard Enterprise Co’s (NYSE:HPE) enterprise services unit.

Even under the merged banner, Computer Sciences way to play the increasing role of big data and the cloud in all manner of businesses in this tech-driven 21st century economy.

The Best S&P 500 Stocks, #6: Applied Materials (AMAT)

The Best S&P 500 Stocks, #6: Applied Materials (AMAT)Industry: Semiconductors
Market Cap: $31.4 billion
YTD Performance: 59%

Applied Materials, Inc. (NASDAQ:AMAT) is not a chipmaker, but instead a service company that provides software and equipment to third-party semiconductor manufacturers. Business is good, with the top line at AMAT growing at a double-digit annual rate both in 2016 and 2017, according to the most recent forecasts, and earnings expanding even faster.

In an age when semiconductors are part of just about everything we use, the services Applied Materials provides are increasingly in demand — and so is this stock.

The Best S&P 500 Stocks, #5: Spectra Energy (SE)

The Best S&P 500 Stocks, #5: Spectra Energy (SE)Industry: Oil & Gas Infrastructure
Market Cap: $29.1 billion
YTD Performance: 74%

Oil and gas infrastructure company Spectra Energy Corp. (NYSE:SE) just rallied to a new all-time high after being left (almost) for dead at the end of 2015 amid the crunch caused by low commodity prices.

A bounce-back for all energy stocks paired with a juicy dividend resulted in buying pressure that quickly turned around this pick in 2016. Even now, SE stock pays a dividend that totals 3.9% after the rally.

Spectra Energy remains a solid income play for long-term investors.

The Best S&P 500 Stocks, #4: Southwestern Energy (SWN)

The Best S&P 500 Stocks, #4: Southwestern Energy (SWN)Industry: Oil & Gas Exploration & Production
Market Cap: $6.2 billion
YTD Performance: 83%

Southwestern Energy Company (NYSE:SWN) still is down roughly 75% from its 2014 highs, thanks to a collapse in energy prices and continued fears about cascading bond defaults across the sector.

However, investors who purchased this now-mid-cap oil and gas explorer at the end of 2015 have enjoyed a nice recovery in SWN shares. That’s because oil prices have rallied from a short-lived low of under $30 in February to around $45 currently.

The Best S&P 500 Stocks, #3: Oneok Inc. (OKE)

The Best S&P 500 Stocks, #2: Oneok Inc. (OKE)Industry: Natural Gas Infrastructure
Market Cap: $10 billion
YTD Performance: 99%

The doubling of natural gas play Oneok Inc. (NYSE:OKE) — the general partner of master limited partnership Oneok Partners LP (NYSE:OKS) — in 2016 is largely a trick of timing, to be honest. Shares traded at a five-year low in December 2015 and briefly again in January 2016 before rallying back quickly off the bottom.

However, a 5% dividend yield even at current pricing is a nice hedge going forward, and since shares still remain within striking distance of 52-week highs, OKE doesn’t appear at risk of rolling over again anytime soon, even if momentum has slowed from its initial snap-back at the start of 2016.

The Best S&P 500 Stocks, #2: Nvidia (NVDA)

The Best S&P 500 Stocks, #3: Nvidia (NVDA)Industry: Semiconductors
Market Cap: $35.5 billion
YTD Performance: 102%

Specialty chipmaker Nvidia Corporation (NASDAQ:NVDA) is a top performer in 2016 after breaking out of a multiyear rut in a big way over the last year or so.

After staying largely rangebound between $12 and $15 from mid-2011 through 2014, Nvidia hit $20 at the end of 2014, $30 at the end of 2015 and $60 just several trading days ago.

The growth story at NVDA stock has been multifaceted, including growing margins overall and a big move into automotive chips as cars use more complex in-dash displays.

The Best S&P 500 Stocks, #1: Newmont Mining (NEM)

The Best S&P 500 Stocks, #1: Newmont Mining (NEM)Industry: Gold Mining
Market Cap: $19.8 billion
YTD Performance: 120%

Once again, we see the story of recovering commodity stocks in Newmont Mining Corp. (NYSE:NEM).

While shares of NEM stock softened up a bit in September, the run was nearly nonstop for this copper and gold miner so far this year. That’s largely thanks to increasing gold prices that have surged by nearly 25% so far in 2016.

And against the backdrop of further inaction from the Federal Reserve on interest rates, the prospect of a comparatively weak dollar supporting commodity prices should mean good things for NEM in the near-term.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/10-best-sp-500-stocks-q3-2016/.

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