It is often said that past performance is no guarantee of future results, but that statement often applies to longer time horizons. No stock moves up in a straight line, though most well known large-caps that are behaving bullishly are able to do so for weeks, months and sometimes longer if for no other reasons than that they have substantial institutional support and garner of plenty of headlines from the mainstream financial press.
Institutional support and popularity aside, some of 2012's first-quarter studs have sputtered to start the second quarter for a variety of reasons. Let's look at a few here.
Bank of America (BAC):
Perhaps the most controversial bank in America, and if it's not, it's in the top-three, Bank of America was the best-performing stock in the Dow Jones Industrial Average in the first quarter with a gain of roughly 70%. That run up was fueled by investors embracing riskier fare through January and February and the good news from the Federal Reserve stress tests on the 19 largest U.S. banks.
It should be noted that Bank of America itself didn't deliver any good dividend or buyback news after the stress tests as its rivals did and as investors started to resist risk at the start of the second quarter, shares of Bank of America have suffered. The stock is down about 14% just since the start of April.
PulteGroup (PHM):
Pulte has been rocketing higher for almost all of this year. Year-to-date, the stock is up almost 60%. In the first quarter, Pulte surged about 49%, indicating that despite some tepid housing data starting in March, Pulte has continues to show considerable strength. Pulte and its rivals got some support on Thursday when the National Association of Realtors said pending home sales rose 4.1% in March to the highest level since April 2010. The index jumped to 101.4 in March from an upwardly revised 97.4 in February.
Netflix (NFLX):
Netflix is one of those high beta growth stocks that some traders just love and some just love to hate. At one point in the first quarter, this stock was up more than 50%. To start the second quarter, Netflix has lost more than 30%. After reporting a first-quarter loss of eight cents per share after the bell Monday, the stock fell to a three-month low. Bottom line: Netflix is a trade, possibly even for a couple of weeks or months, but probably not an investment.
Apple (AAPL):
Apple was up over 47% in the first quarter, but the stock has gotten off to a bumpy start in the second quarter simply because some traders thought the stock was overvalued and that the end of the bull run just had to be near. That sent Apple on a two-week losing streak, but those assumptions were not based on any empirical evidence.
Apple, the world's biggest publicly-traded company, assuaged the bulls by reporting fiscal second-quarter profit of $11.6 billion on sales of $39.2 billion, results that once again enabled the iPad maker to thrash Wall Street estimates. That means on a year-over-year basis, Apple's profit nearly doubled. Apple sold 35.1 million iPhones and 11.8 million iPads during the quarter, increases of 88% and over 150%, respectively.
There is a path of least resistance with Apple: Higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
