Calendar 2018 was a forgettable year for the market. If the S&P 500 were to trade flat for the rest of the year, it would finish 2018 up just 1%. That would mark the S&P 500’s third worst year since the 2008 Recession, and it is well below the market’s average annualized return of 10% over the past 90 years.
But, against the backdrop of a flat market, there were some stocks that won big in 2018. These stocks bucked the sideways trend in 2018, and ultimately rallied well over 50%. Indeed, there were a handful of not-so-small stocks that more than doubled in 2018.
Which stocks were the year’s biggest winners? Let’s take a deeper look at 10 stocks that won big in 2018.
Advanced Micro Devices (AMD)
2018 Gain: 105%
Every once in a while, chipmaker Advanced Micro Devices (NASDAQ:AMD) takes off like a rocket ship because investors get really excited about the company cracking the code against much larger and more dominant competitor Intel (NASDAQ:INTC). This is exactly what happened in 2018.
Specifically, it became clear in 2018 that AMD had an early lead on Intel in next-gen chip production. This early lead was supposed to be spark massive market share gains for AMD in critical data and AI markets. It did. AMD stock popped. But, then those market share gains slowed in later 2018, and AMD stock dropped off its 2018 highs.
Overall, AMD stock had a great 2018. But, it isn’t ending the year on a high note, and the outlook for 2019, with renewed Intel competition and inventory problems in the global semiconductor industry, isn’t all that great.
Turtle Beach (HEAR)
2018 Gain: 780%
At one point in time, premiere gaming headset maker Turtle Beach (NASDAQ:HEAR) was up more than 1,000% in 2018 alone, and the entire rally can be attributed to one thing: Fortnite.
Fortnite was unequivocally the hottest video game sensation of 2018, and arguably the hottest video game sensation in recent memory. Importantly, it is a battle royale style game, which means it requires a good deal of communication between online players. Thus, as the Fortnite trend went viral, Turtle Beach started selling a whole bunch of gaming headsets. Revenues and profits spiked. So did the stock.
Growth has cooled over the past several months as the Fortnite trend has somewhat moderated. This cooling has brought the stock down. Longer term, there are strong tailwinds propelling interest and demand higher across the entire video game market. As such, Turtle Beach has exposure to healthy tailwinds, and so long as this company maintains leadership position in the gaming headset market, the stock should do well.
2018 Gain: 62%
Fast casual Mexican eatery Chipotle (NYSE:CMG) has played the part of Wall Street Hero and Wall Street Zero. In 2018, Chipotle stock wore the hat of Wall Street Hero.
After a forgettable three-year stretch from 2015 to 2017 wherein CMG stock shed more than 20% each year, the stock started to bounce back in February 2018 after the company tapped Taco Bell veteran Brian Niccol as CEO. Then, over the next several months, comparable sales and margin trends started to gradually improve thanks to menu innovations and digital delivery expansion. These improvements sparked a big rally in CMG stock from $250 to $500 in just a few months.
Ever since that big rally, Chipotle stock has been stuck in neutral. The reality is this is a company with mild and unexciting comparable sales growth potential over the next several years, and that the valuation fully accounts for this realistic growth trajectory. Thus, you now have a fairly valued stock that can and will head higher, but won’t be a big winner again in 2019.
The Trade Desk (TTD)
2018 Gain: 206%
Programmatic advertising leader The Trade Desk (NASDAQ:TTD) burst onto the mainstream scene in 2018 with jaw-dropping success. Thanks to the company’s leadership position in a programmatic advertising market that started to gain widespread adoption last year, Trade Desk reported revenue and earnings growth that was essentially second to none in the tech space.
With respect to growth, we are talking 50%-plus revenue growth and 50%-plus EBITDA growth. Those rates aren’t slowing. In 2017, Trade Desk reported 52% revenue growth and 46% EBITDA growth. Year-to-date in 2018, Trade Desk’s revenue growth rate is 54% and the EBITDA growth rate is 65%. This continued robust top- and bottom-line growth is why TTD stock is up more than 200% in 2018.
This rally should continue. Despite recent choppiness in the broader markets, TTD stock is less than 15% off recent highs, which is a pretty anemic drop for a stock up 200% YTD. This resilience can be explained by Trade Desk’s long-term growth potential as a $6 billion company attacking a $1 trillion advertising market. So long as the growth rates remain big here, the stock will keep working.
Under Armour (UAA)
2018 Gain: 61%
Athletic apparel giant Under Armour (NYSE:UAA) got its groove back in 2018. After deteriorating growth trends and falling margins caused UAA stock to plunge nearly 30% in 2016 and over 50% in 2017, stabilizing growth trends and rebounding margins sparked a nice 60%-plus rebound in 2018.
There are two big aspects to this rebound. First, Under Armour’s North America business, which had gone from huge growth to negative growth rather quickly, finally stabilized in 2018 and is now growing again. Second, Under Armour’s margins are finally starting to improve after multiple quarters of significant gross and operating margin compression.
Further gains, however, will be tough to come by. The North America business, despite stabilizing, isn’t growing rapidly, either. The international business is slowing, and margins are crawling — not sprinting — higher. Meanwhile, the valuation is pretty full up. As such, UAA stock replicating its 60%-plus rally in 2019 will be a tall order.
World Wrestling Entertainment (WWE)
2018 Gain: 134%
Flying under the radar in 2018 was media company World Wresting Entertainment (NYSE:WWW). Favorable broadcasting deals coupled with cord-cutting trends that have made live-sports entertainment more valuable than ever have powered healthy operating results at WWE in 2018, the sum of which have helped this stock more than double this year.
At the heart of WWE’s big 2018 run is a focus on deploying original content across multiple channels. WWE is a media company that owns the rights to many original programs, including live wrestling events and reality shows. Demand for these shows is large and stable, and has been growing at a healthy pace over the past several months as WWE has extended its reach into more streaming platforms.
The long-term value prop here is quite compelling. Cord-cutting makes content more valuable than ever, since streamers are now in a bidding war for content. WWE’s content, while not as wide-reaching as content from Disney (NYSE:DIS), is nonetheless highly attractive to a certain demographic, and therefore exceptionally valuable to streamers. Also, WWE hasn’t even scratched the surface of its international potential, and that gives this stock an additional runway to support robust growth for a lot longer.
2018 Gain: 84%
Some stocks on this list staged huge reversals in 2018. Others simply continued longer-term bull runs. Payments processor Square (NYSE:SQ) falls into the latter category. Square stock has rallied more than 80% in 2018, and that builds on a 150% gain in 2017.
The big catalyst here is the secular transition away from cash and toward non-cash payments. As credit and debit card and phone payment volume has gone up over the past several years, Square has found huge success in processing those various non-cash payments. Over the past several quarters, Square’s revenue growth has run in excess of 60%, and was nearing 70% last quarter.
SQ stock has been enormously successful for the past two years because the growth narrative hasn’t slowed at all. So long as the U.S. economy remains healthy and the consumer remains strong, Square’s growth narrative shouldn’t slow at all going forward. Thus, barring a major economic slowdown, SQ stock should continue to be a big winner.
Stocks That Won Big In 2018: Etsy (ETSY)
2018 Gain: 169%
Online DIY marketplace Etsy (NASDAQ:ETSY) has had an explosive 2018, with its shares rising nearly 170% on the back of continued robust growth across the e-commerce marketplace’s entire ecosystem.
There are three things at the center of this rally. One, Etsy hiked its fee structure from a 3.5% take rate to a 5% take rate, thereby immediately providing a boost to revenues and margins. Two, despite the take rate hike, Etsy has continued to report healthy buyer and seller growth. Three, Etsy has built out subscription-based seller services to more deeply monetize its seller ecosystem.
The combination of these three tailwinds has pushed revenues and profits materially higher in 2018, and that robust growth has propelled ETSY stock to all-time highs. This run should continue in the long run, given the company’s strong niche in the online arts and crafts market and further growth drivers through seller services ramp and sustained e-commerce tailwinds. Valuation will rear its ugly head from time to time. But it won’t keep this stock down for long.
2018 Gain: 156%
It has been an ugly run for traditional watch giant Fossil (NASDAQ:FOSL). The mainstream emergence of smartwatches and hybrid watches has killed traditional watch demand, and in so doing, slashed Fossil’s revenues and profits. From early 2014 to late 2017, FOSL stock dropped an almost unreal 95%.
But, Fosil has reinvented itself as a hybrid watch company that combines the technology of smartwatches with the aesthetic of traditional watches. This hybrid watch category has gained mainstream traction recently, and as it has, Fossil’s numbers have stabilized and FOSL stock has popped.
The golden era for Fossil is over. Dreams of this stock going back to its $100 highs are unrealistic. But, the hybrid watch market has healthy growth prospects, and therefore, so does Fossil. Those healthy growth prospects mean the big turnaround in FOSL stock isn’t over just yet.
2018 Gain: 350%
If 2017 was the year of the cryptocurrency craze, then 2018 was the year of the cannabis craze. And if bitcoin was the biggest winner in the crypto craze, then Tilray (NASDAQ:TLRY) was the biggest winner in the cannabis craze.
Tilray went public in July. At that time, this was a little known pot stock with very little revenue and a tiny market cap. Then, Constellation Brands (NYSE:STZ) poured billions of dollars into cannabis company Canopy Growth (NYSE:CGC), and investors were betting on Tilray being the next cannabis company to get a big investment.
That investment hasn’t come, but the stock has remained red hot. It is still up 350% year-to-date, and has shown impressive resilience around the $100 level. Longer term, the cannabis market promises to be huge, and Tilray has a promising head start in this industry. Plus, M&A chatter in the space appears to be heating up. As such, while TLRY stock remains risky, I wouldn’t be surprised to see it have a big 2019 thanks to continued hype surrounding the cannabis market.
As of this writing, Luke Lango was long AMD, INTC, TTD, UAA, DIS, SQ and CGC.