The S&P's Best Sectors in 2013

2013 was a great year for the stock market, but sectors did a lot better than others. Find out where the best gains were.

Jan 4, 2014 at 11:31AM

The S&P 500 (SNPINDEX:^GSPC) rocketed forward to huge gains in 2013, posting a total return of more than 32% for the year. But when you dig more deeply into the S&P's best sectors in 2013, you find that a few areas of the market really stood out from the pack. Let's take a look at the top three performers among S&P sectors last year and why investors in consumer discretionary, health-care, and industrial stocks outpaced the S&P 500's results in 2013.

For consumer discretionary stocks, improving economic conditions led to greater spending in a number of different areas that contributed to the sector's 43% gains. General Motors (NYSE:GM) continued its run of impressive performance in 2013, rising 42% for the second year in a row as auto sales figures kept rebounding. Similarly, Home Depot (NYSE:HD) rode the recovery in the housing market to more strong gains, with the home-improvement retailer's stock climbing 36% as homeowners became more willing to spend on improvements and renovation projects.

Meanwhile, health-care stocks jumped 41%, with biotech companies providing a big portion of the gains in the sector. Even though Gilead Sciences (NASDAQ:GILD) and Celgene don't carry as much weight in the sector as pharmaceutical giants like Johnson & Johnson and Pfizer, their higher growth potential drove investor interest in the sector. In particular, the recent FDA approval of Gilead's Sovaldi could revolutionize hepatitis C treatment, with its being the first oral therapy for certain genotypes of the disease that doesn't involve interferon. Across the sector, new therapies for various diseases are transforming the way patients get treatment, and companies like Gilead are making the most of the opportunity.

Finally, industrials jumped more than 40% in 2013, showing signs of a cyclical recovery in industrial and manufacturing activity. Among the best-known stocks, Boeing (NYSE:BA) was a high-flyer in industrials, as the aerospace industry has seen demand for new aircraft soar in recent years. Boeing's experience in seeing its airline customers ramp up their orders points to a greater willingness generally in companies to invest in their own futures, and industrial stocks are well positioned to benefit from greater demand throughout the sector.

Just because these sectors were strong in 2013 doesn't necessarily mean they'll keep outperforming this year. But with many of the same trends continuing in 2014, it pays to look out for companies in these sectors to see if they have the staying power to keep delivering solid returns this year and well into the future.

Get into the game
The lesson 2013 taught investors is that it pays to have money in the stock market. Yet many stayed out of stocks and therefore missed out on huge gains. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends General Motors, Gilead Sciences, and Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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