On February 29, 2012, we published an article titled: "Top 10 NASDAQ 100 stocks: how will they fare for rest of 2012." In said article, we concluded that with the exception for Apple Inc. (AAPL), it is unlikely that Nasdaq 100 stocks ranked in the top 10 for their year-to-date performance would continue to perform strongly for the rest of 2012.
As of September 27, 2012, the list of the current top 10 performers does not include six of the top performers from February 23, 2012. Companies that have dropped out are: Netflix, Inc. (NFLX), Green Mountain Coffee (GMCR), CA, Inc. (CA), Flextronics International Ltd. (FLEX), Broadcom Corporation (BRCM) and Autodesk, Inc. (ADSK).
Top 10 Performing Stocks for Nasdaq-100 Year-to-date as of 9/27/12
|Company||Stock price as of 09/27/2012||YTD % change as of 09/27/2012|
|Expedia Inc. (EXPE)||$58.22||101.17%|
|Seagate Technology PLC (STX)||$31.93||98.20%|
|Sears Holdings Corporation (SHLD)||$56.36||77.34%|
|Vertex Pharmaceuticals Incorporated (VRTX)||$55.66||67.60%|
|Gilead Sciences Inc. (GILD)||$66.64||62.83%|
|eBay Inc. (EBAY)||$49.12||61.95%|
|Illumina Inc. (ILMN)||$46.98||54.13%|
|Comcast Corporation (CMCSA)||$35.78||52.54%|
|Amazon.com Inc. (AMZN)||$256.59||48.23%|
Furthermore, with the exception of Apple and Seagate, each of the other top 10 performers from February 23 have actually witnessed a drop in their share prices from their February levels, ranging anywhere from -4.92% to -63.4%.
|Company||Closing Price 12/30/11*||Closing Price 2/23/2012||YTD % change as of 2/23/2012||Closing Price 9/27/2012||YTD change as of 9/27/2012||% change from 2/23/2012 to 9/27/2012|
Sears Holdings Corporation
|Seagate Technology PLC||$16.24||$27.11||66.93%||$31.93||98.20%||17.78%|
|Green Mountain Coffee||$44.85||$67.62||50.77%||$24.75||-44.82%||-63.40%|
|Flextronics International Ltd.||$5.66||$7.21||27.39%||$6.12||8.13%||-15.12%|
*Split and dividend adjusted price - source: Yahoo Finance
Between now and the end of the year, membership in the exclusive top 10 Nasdaq 100 performers may not change as drastically as it did since February. Many of those companies that dropped out since February had risen earlier in the year in reaction to having been substantially oversold at the end of 2011, or having possibly experienced a substantial short squeeze, as discussed in our February article.
However, two current top-10 performers may not be able to maintain their standings in the list: Amazon, Inc. and Vertex Pharmaceuticals Incorporated. Amazon, Inc. may suffer due to its excessive valuation, while Vertex may become victim of the digital pricing nature and volatility of high flying pharmaceutical companies.
Amazon, Inc. is up over 48% year-to-date as of September 27, 2012. Its current earnings estimates stand at $0.71 for the year ending December 2012, and $2.33 for next year ending December 2013. Its current share price of $256.59 yields P/E ratios of 361.4 and 110.1, respectively, and a market capitalization of over $115 billion.
Amazon's forward P/E ratio of 110.1 for next year is quite high. Although from a technical perspective, Amazon's 14-day RSI (relative strength) indicator of about 45 is reasonable (whereas an RSI of over 75 indicates short term overbought conditions while an RSI of under 25 indicates short term oversold conditions), Amazon can still be susceptible to substantial downside risk if it misses its targets. As a matter of fact, we believe Amazon's valuation can haunt its share price even if it meets earnings expectations. Given its current year-to-date gains, this may prove to be a good level for investors to book profit on Amazon shares.
Vertex Pharmaceuticals Incorporated
Vertex is up over 67.6% year-to-date as of September 27, 2012. Its current earnings estimates stand at $0.62 for the year ending December 2012, and $0.90 for next year ending December 2013. Its current share price of $55.66 yields P/E ratios of 89.77 and 61.16, respectively, and a market capitalization of about $12 billion. Its current price/book ratio stands at about 14.09.
Vertex experienced strong appreciation during early May following the announcement of strong phase II trials for its cystic fibrosis treatment drug. Its current valuation is further hyped by Vertex being a possible takeover target. However, with a market capitalization of around $12 billion, we believe the likelihood of such event is unlikely in the near term. With its current hefty valuations, and given solid gains in its share price year-to-date, this may present a good opportunity for investors to book profits.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.