It’s safe to say the stock market has been kind to investors this year. The S&P 500 is up about 17% with a handful of trading days left. A great year for any investor. Still, the S&P is just an average with many outliers. Which brings us to the 2012 Best and Worst Market Awards. A collection of outliers that helped form the S&P 500 performance for the year.
But first a rehash of the rules and a quick disclaimer. Just like last year’s awards, I eliminated all penny stocks and kept the list to well-known companies. Fund categories make up a range of possibilities from asset specific to sector specific and leveraged funds weren’t considered for obvious reasons.
Here’s the disclaimer. One, a good or bad investment doesn’t end because a new year begins. Two, research and valuation dictates a good or bad investment not past performance. Like every year, there are greater rewards and risks to investing outside of a total market fund. Even when the focus is on sector specific funds. With that, on to the awards.
Best And Worst of 2012
Pulte Group (PHM) – An entire industry got crushed from the weight of the housing crisis. Pulte Group was one of the better managed residential home builders. It fought through the crisis and came out leaner. In fact, I predicted the home builders would have a good year, but I didn’t expect results like this. PHM is now up about 185% since the beginning of the year. Lesson learned.
Hewlett-Packard (HPQ) – There’s a growing theory that mobile and tablets are killing the PC market. Throw in an accounting scandal and you get HPQ. With a pitiful 45% loss. Despite what investors may think, Hewlett-Packard is not just a PC company. You can argue their printers only exist for ink cartridge sales. Just one reason many value investors have looked at this stock.
Best (and Worst) Stock
Apple (AAPL) – Probably the most talked about company of the year. It become the largest publicly traded company ever, finally issued a dividend, and went a 70% run this year. Eventually hitting $702/share. As usual, extreme headlines hinted at a $1,000 share price and a $1 trillion market cap. Never a good sign, but new investors jumped in anyways. Since then, the stock has rewarded those late investors with a 25% loss.
Best Spec Stock
Sprint (S) – Combine a debt laden company with a surprise buyout offer and you get Sprint. This company was on the ropes at the beginning of the year. A $21 billion debt. Fierce mobile competition with AT&T and Verizon. No one thought a buyout was possible. Then Softbank stepped in with an offer, including debt. Which sent the shares soaring 133%.
Facebook (FB) – The most anticipated and overblown IPO of the year ended badly for first day investors. It was downhill from there, dropping below $17/share from its $38 IPO. That’s a 53% loss. It’s finally showing some signs of life, but far from the IPO price. This was the perfect case of expectations exceeding real value. If this isn’t a reminder to research every investment before buying, I don’t know what is.
Best Dividend Stock
Whirlpool (WHR) – This stock landed the 2011 Worst Dividend Stock Award. It was another casualty of the housing crisis. The industry’s resurgence rewarded investors with a 110% return excluding dividends. Not bad for an appliance maker.
Worst Dividend Stock
Best Buy (BBY) – This Amazon showroom has a nice 5% dividend yield. It also has multiply buyout offers from the same person, the founder. Even worse, shareholders have seen that buyout offer lowered. So management rewarded loyal investors with a 49% loss.
Best Fund Category
Housing Construction – This year was a great example of just how far this sector had fallen. With Pulte landing the Best Stock Award, it shows just how much an individual stock can outperform a great performing sector. A quick glance at the XHB, ITB, or PKB, all housing ETFs, show a 40% plus return on the year. Easily beating the S&P 500. That said, this sector was beaten down so much, there just might be room to go.
Worst Fund Category
Coal – The energy sector is very dependent on two things – demand and favorable regulation. At the moment coal is missing both. Cheaper natural gas has become the go to alternative. A Romney loss didn’t help matters either. Both coal ETFs, KOL and PKOL are down over 20% this year. Finishing a close second was last years award winner, alternative energy.