With 9 Months Down, These Are the Best Stocks of 2011

Last Friday, on the final day of the third quarter, stocks dropped heavily. The losses finished off what was the worst-performing quarter for the S&P 500 (down 14%) and Nasdaq (down 13%) since the fourth quarter of 2008. Good riddance.

For the year, the S&P has lost 10% of its value. The European mess gets most of the blame, but nervousness over economic growth has made headlines, too.

But far away from those concerns stands a group of stocks that have been on fire.

The best of the best
Of all stocks trading on major U.S. exchanges and trading for at least $1.50 a share (to screen out penny stocks) on Jan. 1, 2011, Pharmasset (Nasdaq: VRUS  ) is the biggest winner through three quarters.

Pharmasset is a clinical-stage pharma company with a focus on treating the hepatitis C virus via oral therapeutics. Since the beginning of the year, the company has received fast-track status from the FDA for one of its hepatitis C drugs, entered into a clinical collaboration agreement with Bristol-Myers Squibb (NYSE: BMY  ) , and split its stock.

The second-best-performing stock in all the U.S. exchanges is Icagen (Nasdaq: ICGN  ) , whose 238% gain this year came due to speculation followed by confirmation that Pfizer is buying the drug development company.

Let's look at the list of superstar stocks through three quarters:

Company

2011 Return

Motley Fool CAPS Rating

Consensus Analyst Opinion

Best Performer in ...

Pharmasset 278% * Buy (17 strong buy or buy; 2 hold) All major U.S. exchanges among stocks trading for at least $1.50 on Jan. 1
Green Mountain Coffee (Nasdaq: GMCR  ) 183% * Moderate buy (5 buy; 4 outperform; 2 hold; 1 sell) Nasdaq 100
Cabot Oil & Gas (NYSE: COG  ) 64% *** Buy (7 buy; 3 outperform; 9 hold) S&P 500
IBM (NYSE: IBM  ) 21% **** Buy (12 buy; 4 outperform; 11 hold) Dow Jones Industrial Average

Returns through Sept. 30. CAPS rating out of five stars. Analyst data from Capital IQ, a division of Standard & Poor's.

Though the year isn't over -- and this list may well look different in three months -- there are some quick lessons to draw from this data:

  • I'd accuse analysts of recommending stocks after they've gone on massive run-ups if not for the fact that analysts almost never issue sell ratings. The overwhelming majority of Wall Street analyst ratings can be classified into strong buy, buy, or hold. So consider that fourth column above a reminder that analysts will almost always recommend some degree of buying.
  • Pharmasset: Pharmasset has had some clear victories this year, but the company has never turned a profit -- in fact, its losses have only gotten larger over the years. Though that's not unusual for a development-stage biotech company, investors -- particularly those who don't know the science well or don't have the time to fully grasp the risks -- should be cautious with biotech stocks.
  • Green Mountain Coffee: Growth investing takes guts. One of the signs Motley Fool co-founder David Gardner looks for in a growth stock is that the financial media has declared it "overvalued." Green Mountain has been called overvalued over and over and over again -- by Barron's, and even by Fool.com contributors. The short interest on the stock has been creeping up this year and now stands at 10% of shares outstanding. I'm not sure who will be right about Green Mountain from today forward, but I do know I'll be watching from the sidelines.
  • Cabot Oil & Gas: Researching this column intrigued me enough about Cabot to add it to my personal watchlist. Cabot has been firing on all cylinders of late -- and the stock has followed suit, popping 10% or more on three separate trading days in 2011. The company is a leading player in the natural gas space, and has had strong production in the Marcellus Shale.
  • IBM: This company continues to impress. I'd never bet against Big Blue.

Superlatives like the "best of 2011" list above are fun and instructive. But remember what any mutual fund TV commercial will always tell you: Past performance is no guarantee of future success. If it's forward-looking stock recommendations you're looking for, I encourage you to download an exclusive growth-stock report written by Motley Fool analysts. Just click here for a free copy of the new research report.

And if you own one of the stocks in the table above: well done.

Fool.com managing editor Brian Richards doesn't own shares of any companies mentioned. Follow Brian on Twitter: @brianlrichards. The Motley Fool owns shares of IBM. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (12)

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  • Report this Comment On October 03, 2011, at 4:28 PM, reflector wrote:

    "For the year, the S&P has lost 10% of its value. The European mess gets most of the blame, but nervousness over economic growth has made headlines, too."

    european mess gets most of the blame? haha, really? you don't have to look across the pond to find a scapegoat for what ails us.

    try:

    1) money printing by the fed which continues to debase the dollar

    2) rampant military adventurism abroad costing us $ trillions which is making our country less secure, not more

    3) a runaway debt and deficit problem which congress and the president are unwilling and unable to address.

    4) an entitlement society which makes necessary budget cuts unthinkable for any career politician.

    we've quite thoroughly screwed ourselves here with bad choices over the last decade if not longer, this is just reaping what we've sown.

    no need to go blaming europe for our troubles.

  • Report this Comment On October 03, 2011, at 6:57 PM, IAO1985 wrote:

    " rampant military adventurism abroad costing us $ trillions which is making our country less secure, not more"

    While I do agree the DOD needs to curb their budget to an extent, but as a current member of the Armed Forces and a veteran of OEF people in those countries would like nothing more to destroy your way a life.

    You are much safer today with them occupied fighting us, instead of fighting you in your backyard.

  • Report this Comment On October 04, 2011, at 3:41 AM, reflector wrote:

    IAO, i must disagree with your assessment.

    our country is falling apart all around us.

    infrastructure is crumbling

    people arent being educated

    investment capital is eroding

    there's better use for our financial resources and manpower than invading oil-rich countries.

    i understand that as a member of the armed forces you feel a need to defend the job you do.

    but i'm not criticizing the job you do.

    just because we have a strong military does not mean we should use it whenever possible.

    a wise leadership would understand when to use the armed forces, when to ask soldiers to put their lives on the line.

    invading other countries that had nothing to do with 9/11 and making up some false stories about WMDs only makes others hate us more, it does not make us safer.

    and meanwhile it makes us poorer and weaker.

  • Report this Comment On October 04, 2011, at 9:40 AM, bretco wrote:

    Have to agree with Reflector.

    We honor your service, IAO 1985 and your commitment to the defense of our country

    however, our political leaders, your "bosses",

    have not made wise choices and have put you and your breathen in harms way,

    Remember Colin Powell's " You break it,

    you own it" quote ?

    Now we own two or three broken countries.

    Again, Thank you for your service IAO 1985.

  • Report this Comment On October 04, 2011, at 1:02 PM, IAO1985 wrote:

    The original idea of why went to the Middle East was lost because of poor leadership in the Bush adminstration.

    I have heard the oil thing time and time again. But we have no control over the oil in Iraq. We have turned it over to the Iraqi goverment.

    I went to Afghanistan and not to insult your intelligence but there is not any oil there. They do have some rare metals but nothing worth going to war over. They have TONS of opium. Before the war it is best to think of the country as a Narco state that was controlled by the taliban. There main customers were terrorist organization. By going into Afghan we took away a lot of there capitial.

    Just so you know there has been massive cutbacks in the service. Cancellation of research and massive layoffs. I know it sounds weird saying that your being laid off in the military but it happens. They just won't allow you to re enlist. So the cutbacks are happening. Yes there has been over spending in the military, but I won't EVER believe people died for oil.

    If all we wanted is oil then why not invade South America or Canada? That is how ridiculousness the idea is that we went to war for oil.

    The proof is at the pump. If we went to war for oil and just took it from another country shouldn't our's be almost free? Why not, if we need it just take it from someone. That is not what is going on.

    I do agree that we need to start re investing in our country because there is many problems that we have including education and infrastructural problems.

    It is hard because I have lost friends and have other that have been given their pink slip with little compensation. They are struggling and that isn't what we should do to veterans.

    Were the BIGGEST expense in my opinion is the contractors that are paid to go fight on the be half of the US government. There is a lot of them and they make about 180000 a year to be in Iraq, Afghanistan, and Kuwait. The government pays independent companies BILLIONS to hire civilians to go to war. They will still get paid and service members are getting kicked out. That is a waste.

    Sorry about my rant but it's difficult.

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