What We Can Learn from 2014 Top Stocks

The S&P 500 is a bellwether for the overall performance of US stock markets. However, behind movements in the average, there are winners and losers. Picking the companies that deliver the best stock performance is – in some ways – an exercise in hindsight. However, it’s always worth looking at which stocks have performed well and why when making future investment decisions.

The Airlines

Airline stocks were among the biggest winners on the S&P 500 in 2014. The two stars were Delta Airlines and Southwest Airlines. These two carriers saw their stock price deliver total returns of 47% and 41% respectively in the first six months. Delta was a recent re-addition to the S&P 500, and saw its operating revenue grow while expenses remained flat and fuel costs dropped. Southwest Airlines also saw an increase in operating revenues, but at the same time managed to reduce its operating expenses by 2%. This meant that its operating income increased by around 200%.

Pharmaceutical Winners

Just like the airlines, pharmaceutical companies saw two big winners on the S&P 500 in 2014. By midyear, Forrest Laboratories was the top performer on the S&P 500. The stock soared by 60%, largely to its announced merger in February with Actavis for $25 billion – a 25% premium on the market valuation. The stock popped further when the company announced that it was going to buy Furiex Pharmaceuticals in April. Another big pharmaceutical winner on the S&P 500 was Allergan – the Botox manufacturer – which saw its stock price climb by 43% by midyear.

Technology Stars

There were also two technology stocks among the top 10 in the S&P 500. Electronic Arts – the gaming software giant – saw its stock price climb by 52% by early June, making it the third-best performer on the S&P 500. Although revenues and earnings declined prior to that date, there was a 21% hike in cash flow. The company also predicted net revenues would rise in 2015. SanDisk was another winner, coming in 10th place. The company saw revenues grow by 13% at the end of its fiscal Q1, while profits were up 41%.

Other Top 10 S&P 500 Gainers

Now, we’re down to the final four. Newfield Exploration – which is an oil and natural gas developer and producer – saw its stock price climb by 49% on a 49% increase in Q1 revenue, along with a profit of 17 cents a share compared to a 19 cents loss for the same period the previous year. If you’re a fan of coffee, then Keurig delivered a 50% return in the first half of 2014, following on from an increase of 83% in 2013. Nabors Industries – another oil company – managed to rack up a gain of 54%, largely due to an internal strategic realignment and increasing demand.

Finally, Pepco Holdings – one of the largest energy distribution companies in the US mid-Atlantic – managed to return 47% through early June, 2014, after it agreed to be acquired by Exelon at a 24% premium over its stock price.

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