It's been a so-so year for large-cap U.S. stocks. In the first half of 2018, the S&P 500 rose by just 1.7%. Of course, that's certainly better than a decline, but it pales in comparison to the 21.8% gains the index delivered in 2017, or its 9.9% annualized long-term average.
Having said that, there have certainly been some bright spots in the index. Here's a look at the five best-performing S&P 500 stocks -- the top 1% of the index -- through the first half of 2018, and why each has done so well.
Image Source: Getty Images.
|
Company (Exchange: Ticker) |
Recent Stock Price |
Market Capitalization |
YTD Gain |
|---|---|---|---|
|
Abiomed (ABMD +0.00%) |
$411.56 |
$18.4 billion |
120.2% |
|
Netflix (NFLX +1.15%) |
$394.40 |
$171.4 billion |
105.2% |
|
Twitter (TWTR +0.00%) |
$44.39 |
$33.4 billion |
84.7% |
|
TripAdvisor (TRIP 0.96%) |
$56.27 |
$7.0 billion |
63.3% |
|
XL Group (XL +0.00%) |
$56.04 |
$14.5 billion |
59.4% |
Data Source: TD Ameritrade. Prices, market capitalizations, and YTD performance as of July 3, 2018. YTD = year to date.
Why they've done so well
Here's a brief overview of why each of these stocks is in the top 1% of the S&P 500 in terms of performance so far in 2018.
- Abiomed: This healthcare company makes medical devices, including its flagship Impella heart pump, and to understand its strong stock performance, you need only look at the company's recent results. For fiscal year 2018, which ended March 31, its revenue jumped by 40%, significantly beating analysts' estimates. Margins expanded by 400 basis points, and earnings also blew past expectations. Those results came on the heels of already impressive performances in previous quarters, and several increases to the company's guidance.
- Netflix: To say that investors are optimistic about the video-streaming leader's potential would be a huge understatement. As of this writing, the stock trades for more than 250 times earnings. And it's easy to see why. The company is growing at a tremendous rate, and the growth is accelerating, not slowing down as generally happens as a company gets larger. Its most recent earnings report showed annual revenue growth of 40%, and the company is expecting more than 41% year-over-year growth for the second quarter. Not only that, but Netflix's operating margins are expanding even faster than the company's already ambitious targets.
- Twitter: Not too long ago, growth investors were essentially leaving Twitter stock for dead. After the social media company went public in late 2013 at $26 per share, its shares sore to nearly $45 on its first trading day. But after spiking to around $69 in January 2014, Twitter's share price plunged, and despite some rallies, landed at less than $15 in 2016, a period when the company was losing money and struggling to come up with a promising turnaround strategy. Well, those days are over. Twitter's push into video content and its successful cost-cutting efforts allowed the company to report its first-ever quarterly profit in February.
- TripAdvisor: The travel site operator's big jump came in May after the company's first-quarter results handily beat expectations. Although revenue only grew by 2%, investors had been expecting a decline. More significantly, due to efficiency improvements, adjusted earnings came in at nearly double analysts' expectations.
- XL Group: This is an easy one. In March, XL Group agreed to be acquired by French insurer AXA for $57.60 per share, which is a huge premium to where shares were trading before the deal was announced. Shares jumped up to near that offered price.
Don't be afraid of stocks that have performed well
One of the most important lessons I've learned during my years of investing is that just because a stock has performed incredibly well, that doesn't mean it's expensive. In fact, the opposite is often true.
I thought that Amazon was insanely expensive after it rallied by 400% from 2010 through the end of 2015, only to watch the stock climb by 154% from there. And yes, I thought Netflix was ridiculously overvalued going into 2018. Yet as noted in the chart above, that stock has more than doubled over the past six months.
The point is that it's important to assess any stock with the most current information. While I'm not making any assertions about the valuations of the stocks discussed here -- as good buys or bad -- it's important not to dismiss them solely because of their recent strong performances.
