With only a couple of weeks left in the year, this is a good time for investors to look at the stocks they own and decide whether their performance has met expectations. Let's take a look at some stocks that had an amazing run in 2012. Then we'll examine what made it such a great year for each of them.
Huge winners
Here are some of the biggest gainers of 2012:
|
Company |
YTD Return |
|---|---|
|
3D Systems (DDD +1.25%) |
205% |
|
Constellation Brands (STZ +1.31%) |
71% |
|
Gap (GPS +0.28%) |
69% |
|
lululemon athletica (LULU 0.26%) |
57% |
|
Home Depot (HD 0.03%) |
49% |
Source: Yahoo! Finance.
These companies' shareholder returns have been nothing short of remarkable. All five of these companies outperformed the S&P 500 by at least fourfold year to date. The S&P 500 and Nasdaq indexes returned roughly 12% and 15%, respectively, during the same period.
But while investors spend a lot of time focusing on year-to-date returns, you should also closely pay attention to other important considerations. For example, don't ignore major changes in the company -- like events that put pressure on a company's top-line growth, a management shake-up, or how well the company is maintaining profitability. That way you can figure out whether a company deserves to remain a part of your portfolio.
Let's take a closer look at what made 2012 a great year for these five companies.
Printing great returns
While still in its infancy, 3D Systems' cutting-edge 3-D printing technology holds a lot of promise. 3-D printing allows you to construct and print objects from a digital design using layers of materials like plastic, ceramic, and metal. Industrial companies are currently using the technology, but the printers are becoming more affordable for home and office use.
This year 3D Systems achieved amazing top-line growth and released The Cube, a 3-D printer that costs a more reasonable $1,300. But this razors-and-blades business-model company makes its money off the consumable cartridges. Even though 2012 was a blockbuster year for 3D Systems, the company -- and industry -- still holds a lot of potential.
Investors will drink to that
With little international presence, slowing growth in China and European economic woes didn't affect wine maker Constellation Brands. Its stock jumped more than 40% in one late-June week as the result of a deal that'll grant Constellation sole distribution rights to Grupo Modelo products in the U.S.
This agreement came at an opportune time for Constellation, as an anticipated drying up of domestic grape supply has U.S. wineries scrambling to plant new vines and increase capacity. But since it takes five years for new grapevine plantings to show up in our favorite Cabs, Constellation will likely benefit from further product diversification, as it's primarily a wine company with a small spirits and beer portfolio.
Enlightened returns for retailers
Cotton prices rose substantially in 2011 and early 2012, putting serious pressure on Gap's gross margins. But margins improved during the second half of 2012 as cotton prices retreated. Meanwhile, yoga apparel retailer Lululemon uses mostly synthetic, technical textiles for its attire, as opposed to cotton. Therefore, the company was more immune to cotton price increases and didn't feel the margin pressures. Lululemon's cult-like customer base continues to drop huge dollars on its apparel -- sales per square foot in 2011 were an amazing $1,941 for Lululemon compared to $386 for Gap.
Home run
Home Depot benefited tremendously from the beginning signs of a long-anticipated upswing in the housing market. Whether homeowners were making improvements or homebuilders were buying building supplies, Home Depot profited from the increased demand. The DIY retailer announced in mid-September that it'd pull out of China, after failing to read the Chinese home-improvement market and the way Chinese customers shop.
Foolish bottom line
While it's never a wise idea to invest in a company solely based on its stock's most recent performance, an investor can learn a lot from focusing instead on what factors made a company prosper in any given year. One blockbuster year is irrelevant without the existence of other successful company attributes like a sustainable competitive advantage, great management, and solid financials.
