As we prepare to invest in the New Year, we can learn from the five best and worst performing stocks of 2012 in the Standard & Poor's 500 Index.
While any investor would have loved to know this list a year ago, it's a good guide for 2013. Several of the factors that drove these share prices up and down in 2012 haven't changed.
The best stocks were led by signs of a recovery in housing, a slight return of consumer confidence, and the U.S. Federal Reserve's unprecedented monetary easing measures.
"The sector leaders are what one would expect with the [Fed] policy and with continued monetary injections into the economy this year through bond purchases," Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC, told The Wall Street Journal. "By pumping money into the economy the Fed boosts consumer confidence-and spending-which one would expect to boost consumer and financial shares."
While the leaders' success was tied to central bank actions, the biggest losers simply stumbled from their lack of innovation, inept management, and failed business models.
Best Stocks of 2012
Here are the best performing stocks in the S&P 500 for 2012:
- PulteGroup Inc. (NYSE: PHM)- This Bloomfield Hills, MI-based homebuilder may not be a household name but its performance was driven by the stabilization of the housing industry, six years after it burst. Housing prices and starts improved all year while foreclosure inventories dwindled, allowing Pulte's earnings per share to grow over 80% this year. Analysts expect EPS growth of 67% in 2013. Up 182% YTD.
- Sprint Nextel Corp. (NYSE: S)– Almost left for dead, the Overland Park, KS-based Sprint saw its stock nearly fall to $2 at one point this year, but speculation over a possible buyout pressured the stock higher. In October Japanese telecom power, SoftBank, initiated a 70% stake in Sprint, confirming those rumors. Sprint has somewhat turned itself around this year by reducing its debt and introducing more smartphone options to their collection in stores and on plans. Yet, the third-largest telecom provider is still quite volatile, and the risks associated with its stock outweigh any remaining upside potential. Up 139% YTD.
- Whirlpool Corp. (NYSE: WHR)- Another beneficiary of the housing recovery, this time on the appliance side. Besides producing products bearing the Whirlpool name, the Benton Harbor-MI based company makes Maytag, KitchenAid, Jenn-Air, and Amana appliances, as well as products with IKEA, Sears Holding Corp. (Nasdaq: SHLD) and The Home Depot Inc. (NYSE: HD) brands. In its October third-quarter earnings release, the company increased its final outlook for 2012, expecting full-year diluted EPS of $6.90 to $7.10, compared to the previous estimate of $6.50 to $7.00, and higher than 2011's full-year diluted EPS of $4.99. Up 112% YTD.
- Expedia Inc. (Nasdaq: EXPE)- The Bellevue, WA-based provider of travel tools went back to its roots this year when it spun off TripAdvisor and its travel-related media sites. Besides its namesake site, Expedia owns Hotels.com, Hotwire.com, and China based travel Website, eLong. The exposure to China should help it continue to grow, but as a travel company Expedia is heavily dependent on the swings of the economy. Up 108% YTD.
- Bank of America Corp. (NYSE: BAC)- After the atrocious year Bank of America had in 2011 it was due for a bounce back, and the Federal Reserve certainly provided more than enough help for that through its expansive monetary actions. As a sector, financials outperformed the market in 2012 and many expect that trend to continue into 2013. An improving housing market will help to bolster banks' balance sheets, as well as a lending environment that increasingly favors big banks. Up 105% YTD.
Worst Stocks of 2012
Here's a list of the worst performing stocks of the year, and they all should still be avoided.
- Radio Shack Corp. (NYSE: RSH)- Fort Worth, TX-based Radio Shack had an awful year, and it looks likes things are only going to get worse. The fact is people are simply not shopping at Radio Shack, which offers smartphones from the major carriers as well as having convenient locations throughout the country. Yet, competition from other retailers and an overall lack of appeal to consumers caused a third-quarter per share loss that was more than double what analysts expected, and now the consensus is Radio Shack won't return to profitability until 2014 at the earliest, if ever. Radio Shack's days of a tech leader are well gone, and it appears the company isn't the best follower either. Down 78% YTD.
- SUPERVALU Inc. (NYSE: SVU)- Even before the Eden Prairie, MN-based grocery store chain owner effectively put itself up for sale in July, there were plenty of things going wrong for the company. Saddled with debt the company was forced to suspend its quarterly dividend and had to lay off over 3,000 workers this past year, with plans for more cuts. The hope that Supervalu or some of its chains will actually be bought occasionally boosts the stock, but overall it should be avoided. Down 71% YTD.
- Apollo Group Inc. (Nasdaq: APOL) – The for-profit education provider was hit hard by the growing student-debt crisis this past year. The University of Phoenix operator reported its fourth-quarter profit for 2012 fell 60% from the previous year, led by declining enrollments and higher costs. The Apollo group said it will have to close 115 of its smaller locations in the upcoming years. Down 62% YTD.
- Advanced Micro Devices Inc. (NYSE: AMD)- The collapse of PCs took a mighty toll on global semiconductor companies such as AMD and fellow fallen tech giant Hewlett Packard Co. (NYSE: HPQ) that make chips primarily for PCs. The growth of tablets that use semiconductors made by other companies caused the company to announce a 15% layoff in staff and a much worse third-quarter loss than expected. Down 57% YTD.
- Best Buy Co. Inc. (NYSE: BBY)- The mighty retailer is struggling to keep up with the evolving landscape of tech retail and has had to cope with internal issues all year. Former founder, Richard Schulze, has repeatedly attempted to buyout the company and return it to a privately held firm. The company's unclear future, as well as repeated earnings and revenue misses, has caused BBY stock to be cut in half this year. After reporting third-quarter profits that were 97% lower than a year ago and cutting its full-year guidance, don't expect this retailer to become a "buy" anytime soon. Down 51% YTD.
Heading into the New Year with so much uncertainty can make investors nervous. If you want to avoid stocks that will suffer in 2013 and find some of the biggest winners, check out Private Briefing.
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