The 10 Best Stocks of the S&P 500 in Q1

You may be surprised at some of the first quarter's standouts

Source: Rachel Kramer via Flickr

Back in November and December, it seemed that all you had to do was throw a dart at a list of stocks and enjoy 10% or 20% gains. Lately, however, the market has lost a bit of that mojo, and profits are harder to come by.

For instance: Despite a nearly 6% gain for the index overall as of this writing, only about 20 stocks in the S&P 500 are up more than 25% since Jan. 1 and only a single constituent of the index is up more than 40%.

Those stocks are still sitting on great gains in three months’ time, don’t get me wrong. But at this time in 2016, we saw four stocks sitting on 40% gains or greater — that, despite a roughly 1% gain for the S&P 500 from Jan. 1, 2016 to March 31, 2016.

So which stocks are the ones that actually have put up those outsized gains in 2017? The list is all over the place, with a mix of homebuilders, biotech stocks and even a utility thrown in there.

Take a look at the top performers of Q1:

S&P 500’s Best Stocks in Q1, No. 10: Skyworks Solutions (SWKS)

Industry: Semiconductors
Performance: 31.2%

Skyworks Solutions Inc (NASDAQ:SWKS) has a market cap of about $18 billion, and is one of the few smaller-sized semiconductor companies that still exist in this age of acquisitions within the sector.

But even if a deal isn’t forthcoming immediately, regular double-digit revenue growth and continued earnings expansion show Skyworks is still a well-run company with something offer.

As such, investors have been eager to buy into this growing chipmaker with hopes of another leg up if an acquisition materializes with a nice buyout premium on top of current share prices.

S&P 500’s Best Stocks in Q1, No. 9: Idexx Laboratories (IDXX)

Industry: Veterinary equipment and supplies
Performance: 31.8%

Idexx Laboratories, Inc. (NASDAQ:IDXX) may sound like a conventional pharma company at first glance, but it’s actually an impressive niche play based on its focus on pet products and animal treatments.

Anyone who has a pet knows firsthand that surgery or intensive veterinary procedures can be quite costly … but they also would likely agree that pets are like family and worth the expense.

In addition to diagnostic tools for vets, Idexx also serves livestock and poultry farmers to protect the health of their herds and flocks. The growth story is good, with revenue set to climb another 8% this year to almost $2 billion — but profits are even more impressive, with earnings set to grow 20%.

Without a lot of good growth options out there, IDXX is attracting investors for good reason in 2017.

S&P 500’s Best Stocks in Q1, No. 8: Micron (MU)

Industry: Semiconductors
Performance: 31.8%

Micron Technology, Inc. (NASDAQ:MU) designs and manufactures semiconductors, mainly in the arena of flash memory systems.

Though it’s a serious player with a market cap of about $32 billion, as we’ve seen in recent years with big-time acquisitions such as the $47 billion acquisition of NXP Semiconductors NV (NASDAQ:NXPI) by Qualcomm, Inc. (NASDAQ:QCOM), it is more than digestible via by a larger company looking to consolidate power in the sector.

Micron’s flash memory operations are attractive in and of themselves in addition to operations that can be streamlined with economies of scale, and investors are clearly expecting more buyouts within the sector — and a nice pop for Micron when it becomes an inevitable target.

S&P 500’s Best Stocks in Q1, No. 7: Wynn Resorts (WYNN)

Industry: Casinos
Performance: 32.4%

Casino operator Wynn Resorts, Limited (NASDAQ:WYNN) used to trade for almost $250 a share in 2014, back when its Asia operations were booming. But as recently as January, it traded for less than $90 a share thanks in part to growth troubles overseas and the big debts taken on by Wynn to finance growth.

But now, Wynn revenue is bouncing back in a big way after some impressive earnings and sales growth; This year, revenue should jump 23% year-over-year and earnings should jump 26%. The company’s Wynn Palace resort just opened in the newer, upscale Cotai region of Macau and could fuel even further upside.

Sure, WYNN may not get to where it was a few years ago … but the momentum is clearly higher in 2017.

S&P 500’s Best Stocks in Q1, No. 6: Viacom (VIAB)

Industry: Media
Performance: 32.8%

Viacom, Inc. (NASDAQ:VIAB) is the media titan behind cable networks including MTV, Comedy Central and Spike, as well as the Paramount Studios movie division. The company has struggled mightily over the past couple of years, and VIAB stock has been more than halved amid management woes that resulted in Sumner Redstone announcing in late 2016 that he would step down from the board of directors.

Now, VIAB isn’t just in recovery mode — it’s surging through the first three months of 2017, led by optimism about new CEO Bob Bakish, who was installed this past November. And in February, Bakish revealed a turnaround plan that includes pushing more resources toward — and better integrating Paramount with — the aforementioned cable networks.

Viacom also has been getting a push from general bullishness in media stocks driven by Donald Trump’s presidential election victory.

S&P 500’s Best Stocks in Q1, No. 5: Incyte (INCY)

Industry: Biotechnology
Performance: 33.3%

Biotech player Incyte Corporation (NASDAQ:INCY) is one of the top performers in the S&P 500 so far this year thanks to a steady march higher in the wake of some very strong earnings performances lately.

In 2016, EPS soared to 54 cents from just 3 cents in 2015 thanks in large part to the success of its Jakafi medication that treats blood disorders. Drug sales continue to impress in 2017, too, leading to chatter about a possible takeover by a larger pharmaceutical player.

But even if that deal doesn’t materialize, investors are still eager to own INCY stock because of its impressive earnings and revenue expansion in recent quarters.

S&P 500’s Best Stocks in Q1, No. 4: Illumina (ILMN)

S&P 500's Best Stocks in Q1, No. 4: Illumina (ILMN)

Industry: Genetics
Performance: 33.3%

Illumina, Inc. (NASDAQ:ILMN) is a genetic analysis company that is increasing demand as more doctors and drug companies are using DNA and gene therapies in their normal course of operation.

The company is a great mix of both a reliable business in the near term, with about $2.65 billion in revenue projected this year, and future growth thanks to the popularity of genetic sequencing and its big investments in continued innovation within the field. The margins are fantastic, too, with one of its most recent products, the NovaSeq 6000, being listed at a price of $985,000!

Eventually, technological disruption and competition will drive down pricing over time. But for now, investors are cashing in nicely on ILMN stock.

S&P 500’s Best Stocks in Q1, No. 3: Activision Blizzard (ATVI)

Industry: Video Games
Performance: 38.1%

Software company Activision Blizzard, Inc. (NASDAQ:ATVI) has seen very strong performance lately as it continues to prove that it is the go-to video game studio in a digital world where the distribution rules have changed. Games like World of Warcraft and Call of Duty boast loyal followings, and new titles like Overwatch are growing in popularity and providing an influx of new customers.

But it’s not just the players that matter, but also the methodology ATVI uses to fuel in-game purchases — transactions that totaled a mind-blowing $3.6 billion last quarter.

While much is uncertain about the future of entertainment in a digital age, one thing is clear: Activision Blizzard has strong titles and a strong business model to get gamers to spend money. That has cheered investors and lifted the stock dramatically lately.

S&P 500’s Best Stocks in Q1, No. 2: Vertex Pharmaceuticals (VRTX)

Industry: Biotechnology
Performance: 48.4%

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), like most other pharma and biotech stocks, received a huge bid related to the fate of a single drug.

In this case, VRTX shot into this list with a massive bump in the last few days of the quarter. On March 29, the company received positive results from a late-stage trial of its cystic-fibrosis drug, a combination of tezacaftor and ivacaftor. The treatment was successfully tested in a 24-week study, and Vertex will now try to seek regulatory approval in both the U.S. and the European Union.

Interestingly, Vertex’s treatment is something of a “replacement” for its own current cystic-fibrosis drug, Orkambi, which the company already markets, but has struggled to sell well thanks to various side effects.

S&P 500’s Best Stocks in Q1, No. 1: NRG Energy (NRG)

Industry: Utilities
Performance: 52.6%

Utility stock NRG Energy Inc (NYSE:NRG) isn’t exactly one of the names you’d expect to see on top of the S&P. After all, utilities are highly regulated and geographically limited, so they don’t experience a lot of growth in normal times.

However, NRG ran into some hard times and a long stretch of unprofitability that caused shares to plummet from almost $40 a share at their peak in 2014 to a 52-week low under $10 recently.

But as is the way of Wall Street, activist investors at Hedge fund Elliott Management and private equity firm Bluescape Energy Partners took big stakes and teamed up to push for “numerous opportunities to significantly increase shareholder value.” That means looking for assets to sell or even a deal for the whole company, and other investors looking to get in on that potential windfall have bid up shares dramatically as a result.

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. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/q1-sp-500-best-stocks/.

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