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All Contents © 2019The Kiplinger Washington Editors
By Jeff Reeves
| December 20, 2016
All in all, 2016 was a year that most investors would like to forget about. Yes, we are technically up by double-digits over the past 12 months or so … but there was more than a little heartache along the way.
There were recession fears back in Q1 as the economy slowed. In June, we had the drama of the Brexit vote. Then in November, we had a little election of our own in the U.S.
The last few weeks of 2016 have been a breath of fresh air, with markets powering to all-time highs and many investors showing a renewed sense of optimism for what lies ahead. In many respects, Wall Street has already moved on from this year and is now living firmly in 2017.
However, the challenges of the last year shouldn’t be forgotten — and neither should the companies that managed to put up consistent market-beating gains even while the broader stock market was struggling until Election Day.
Here are the top 10 stocks in the entire S&P 500, spanning sectors from retail to manufacturing to energy to tech, all with unique growth stories that are worth telling.
Industry: Engine manufacturing
Market cap: $23 billion
Performance: 58% (vs 11% for the S&P 500)
Cummins Inc. is an iconic manufacturer that is the gold standard among diesel engines. It’s shaping up to be another record year for auto sales, pacing at or slightly above 2015’s total of 17.5 million vehicles, which itself was the highest volume in a decade.
Cummins has capitalized on this via its close relationship to truck sales trends. However, hopes of a cyclical recovery and “reflation” in 2017 also have many investors betting that businesses will be investing in fleets and machinery going forward at an even higher rate.
CMI stock is up 15% since early November on this trend, powering it to market-beating outperformance and ranking it as one of the best performers in the S&P 500 this year.
Industry: Electronics retail
Market cap: $15 billion
Once-troubled retailer Best Buy Co. Inc. has finally gotten its mojo back despite the continued dominance of e-commerce in the age of Amazon.com Inc. (AMZN).
That’s partially because of Best Buy’s investment in its own digital sales operation, with more than $4 billion in online sales across fiscal 2016 for more than 10% of total sales. But it’s also because BBY stock has right-sized operations with aggressive cost cutting across 2015, and has outlasted brick-and-mortar rivals.
The continued confidence of American consumers in an age of low unemployment and hopes of tax cuts under President Trump to boost discretionary spending have added to the bullish case here. And they’ve certainly made this specialty retailer quite a profitable investment over the past year or so.
Industry: Energy transportation
Market cap: $28 billion
Spectra Energy is an energy infrastructure stock, operating pipelines for oil and gas across the U.S. and Canada.
An interesting convergence of trends has allowed SE stock to soar in the past 12 months, including the Obama administration’s commitment to squashing projects like the Keystone XL pipeline and the more recent election of Donald Trump and nomination of former Texas Gov. Rick Perry as a Secretary of Energy.
The former prevented competitors from entering the space, and the latter will provide a very sympathetic regulatory environment for energy companies like Spectra in the next few years.
Throw in rising energy prices that have helped producers and increased demand for infrastructure, and it all adds up to a nice year for SE stock.
Industry: Gold mining
This summer, commodity stock Newmont Mining Corp. was in the running for the absolute best performer in the entire S&P 500. Shares have softened up significantly since a 52-week high in August, though they’re still up by more than 70% with very little time left in the year.
That’s partially because of a rise in gold prices in the first half of the year, but also because of stability in the junk bond market, whose tumult threatened to cause industry-wide turmoil about a year ago.
As the dollar stays mighty strong in the wake of a Federal Reserve rate hike and investors are piling into risk-on stocks again, gold is admittedly challenged in the near-term. But those who bought NEM stock early in 2016 have still been richly rewarded.
Industry: Energy infrastructure
Market cap: $5 billion
Quanta Services Inc. is one of the smallest components in the S&P 500, but it has put up big gains in 2016 thanks to the resurgence of energy stocks.
Quanta is a provider of specialty contracting services to utility companies and oil drillers in the U.S. and Canada. And PWR not only weathered the downturn in energy prices better than its peers — it snapped back much faster. After just one quarter in the red in late 2015, PWR is on track to see earnings up about 150% year-over-year to their highest level since 2013, according to S&P Capital IQ estimates. And on top of that, EPS should pop another 30% in fiscal 2017!
While some energy contractors are still getting their feet back under them, PWR is powering higher and is well-positioned to benefit from increased spending in the space.
Industry: Semiconductor manufacturing
Market cap: $36 billion
Applied Materials, Inc. is not a chipmaker, but still is a big player in the semiconductor space since it provides software and complimentary gear to other chip manufacturers.
Business is good, with the top line at AMAT growing at a 17% clip this fiscal year if current forecasts hold. And in an age when semiconductors are part of just about everything we use, the services Applied Materials provides are increasingly in demand.
The acquisition of energy-efficient chip company Varian in 2011 seemed to be a mixed bag in the aftermath of the $5 billion deal, but the move now seems very wise given the focus on mobile device performance and battery life as well as related applications in the solar energy field.
This combination of current growth and a bright future has investors very eager to own AMAT.
Industry: Information Technology
Market cap: $9 billion
Computer Sciences Corporation is a technology consultancy that aids businesses in their IT infrastructure, cloud computing access and data center management.
The company is very much 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 now trades under the name CSRA Inc. (CSRA). Then shortly after, it merged with the enterprise services segment of Hewlett Packard Enterprise Co. (HPE).
But investors like what they see since CSC is in the right place at the right time for a tech-enabled economy that needs the flexibility and expertise that comes with an outside firm instead of expensive in-house resources.
Industry: Integrated mining
Market cap: $19 billion
Freeport-McMoRan Inc. is a major miner of copper and gold, and was left for dead by many investors at the beginning of 2016 as a strong dollar and crashing commodity prices pushed it to the brink of bankruptcy.
However, while shares are still down about 75% from their 2011 peak of about $60 a share, FCX stock has rebounded nicely thanks to restructuring its debts and surviving until prices improved for its mineral assets over the past few months.
With risk-on “reflation” investments like this commodity stock back in favor since the beginning of November, the momentum doesn’t seem to be slowing in FCX now that it has stabilized compared with this time last year.
Market cap: $12 billion
Natural gas play Oneok, Inc., which has more than doubled so far this year, is the general partner of high-flying master limited partnership Oneok Partners LP (OKS) — up 40% on its own this year.
These gains are partially a trick of timing, as shares traded at a five-year low in December 2015 and briefly again in January 2016 before rallying off the bottom. However, there is undoubtedly a more favorable energy environment lately that includes firmer oil and gas prices as well as hopes of a cyclical recovery that could boost demand.
Because of these trends, OKE stock looks like it will hang onto its gains as we enter 2017.
Industry: Graphics processing manufacturing
Market cap: $56 billion
Nvidia Corporation has been on fire in 2016, nearly tripling in price with a constant upward slope to its share price.
That’s because of two powerful trends: the strong demand for high-end graphics processing chips that has long been the core of NVDA growth, and the potential of new revenue streams in the realm of artificial intelligence.
The numbers speak for themselves, with third-quarter top-line growth of 54% year-over-year reported in November, smashing expectations. The company also boosted its dividend 22% to boot!
Virtual reality graphics and artificial intelligence computing are still very much in their infancy, but Wall Street seems to think Nvidia will be at the top of both of these fields. And judging by continued momentum in its stock, investors think much more growth is ahead for NVDA.
This article is from Jeff Reeves of InvestorPlace.
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