I’m not a big believer in extrapolating past performance into the future. Nor do I believe that looking at the past six months is any more insightful than evaluating the last three weeks, five minutes, or 200 days.
Nevertheless, a long weekend at the year’s midway point is as good a time as any to look at what’s been working and not working, and it makes sense to draw the line where the year began.
A lot has changed since the start of 2011, and I think we’ve learned a couple big things we weren’t sure of six months ago:
- The earnings of listed companies can grow nicely even when the domestic economy’s not doing so well. But on the other hand, the valuation multiples of listed companies could contract if their success is seen as unsustainable given the state of the broader economy
- The US — and in particular US government debt — remains the safe harbor of choice when things go wrong, despite all the fundamental reasons it shouldn’t be. It remains this way because the Fed remains the central bank most cognizant of the serious downside risks to growth, and the one most likely to step in with significant additional asset (read: government bond) purchases
Now on with a rough but annotated rundown of the winners and losers.
Top S&P 500 Stocks, Year-to-Date (via finviz.com as of mid-morning on July 1)
- National Semi (NSM) +80%: Thanks, Texas Instruments (TXN) …
- Cabot Oil & Gas (COG) +75%
- Biogen Idec (BIIB) +59%
This is good for the investors in those names, but no so good for long-term employment prospects. We know that healthcare costs are a major restraint on hiring, and the performance of the stocks suggests that premiums are still rising at an unhealthy clip.
Worst-Performing S&P 500 Stocks, Year-to-Date
- AIG (AIG) -39%: But, hey, above the government’s recent offering price.
- Monster Worldwide (MWW) -38%: Thanks for nothing, corporate America.
- Hudson City Bancorp (HCBK) -34%: A 3.9% yield and selling at 14% off book value, if you believe the book.
Top Mid-Caps Year-to-Date (Market cap between $2 billion and $10 billion, share price above $5)
- Global Crossing (GLBC) +197%
- Pharmacett (VRUS) +158%: Hepatitis C is big business.
- Golar LNG (GLNG) +138%: Liquid natural gas might be, one day.
Filtering the top performing mid-caps for a forward P/E ratio below 15, price/cash flow under 10, earning per share growth this year above 20%, and a 20%-plus return on equity:
- GT Solar (SOLR) +78%: A silver lining in a cloudy sector.
- Domtar (UFS) +26%: I wrote about this, saying “Temple Inland Isn’t Alone,” but it's been flat since.
- ITT Educational Services (ESI) +23%
Top Developed Markets, YTD
Foreign market data from MSCI in local currency ... and your mileage may vary. Bespoke Group has Russia gaining 7.7%, while MSCI shows it barely above break-even.
- New Zealand +7.5%
- Ireland +7%: Started the year in the gutter.
- US +5.2%: Best-performing market that matters.
Worst Developed Markets, YTD
- Finland -16%: Alas, Nokia (NOK) is down 38% YTD.
- Greece -12.5%: One of the world’s most notable economic failures.
- Israel -12.4%: One of the world’s most noted economic successes.
Top Emerging Markets, YTD
- Hungary 6.2%: See “What Greece Can Learn from Hungary.”
- Indonesia 6.1%: See “Two Breakout Emerging Markets.”
- Czech Republic 5.9%
Worst Emerging Markets, YTD
- Peru -28.1%: Democracy is an itch.
- Egypt -24.2%: Ditto.
- India -9.2%: Ditto.
- Brazil -9.1%
Best Frontier Market, YTD
Ghana +35.1%: Praise be to offshore oil.
Worst Frontier Market, YTD
Bangladesh -26.4%: Onshore banking shenanigans, but it's been better lately.
Top ETFs, YTD (All unleveraged; ETF data from finviz.com as of Friday afternoon.)
- iShares Dow Jones US Healthcare Provider (IHF) 21%: See health insurers above.
- Biotech HOLDRs (BBH) 19%
- iShares MSCI Spain Index (EWP) 16.9%: Mostly because of gain by euro.
Worst ETFs, YTD (All unleveraged)
- iPath S&P 500 VIX Short-Term Futures ETN (VXX) -43.8%: Broken and pointless.
- iShares MSCI Peru (EPU) -24%
- Market Vectors Vietnam ETF (VNM) -20.3%: Licking US was easy. Whipping inflation is hard.
Top Commodities ETFs, YTD:
- United States Gasoline (UGA) +18.4%
- iShares Silver Trust (SLV) +12.1%: Had a hell of a ride, back in the day.
Worst Commodities ETFs, YTD
- iPath DJ-UBS Grains Subindex ETN (JJG) -13%: A big harvest is expected, and it better come in.
- United States Natural Gas Fund (UNG) -8%: Broken and pointless.
Top-Performing Industries, YTD (From Marketwatch.com, based on Dow Jones industry indices.)
Pipelines, consumer finance, tires, travel & tourism, healthcare providers.
I especially like Expedia (EXPE) in the travel group (see “Is Expedia a Buyout Candidate?”). It has since announced the spin-off of TripAdvisor, the best, stickiest travel planning site out there, and one that the more expensive Priceline (PCLN) has no answer to.
Worst-Performing Industries, YTD
Precious-metals miners, business trainers and recruiters, auto makers, mortgage finance, non-ferrous metals, airlines.