Please ensure Javascript is enabled for purposes of website accessibility

Today's 3 Best Stocks

By Sean Williams - Apr 23, 2013 at 5:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A roundup of the day's best performers within the S&P 500, and what their moves mean for investors.

It was certainly an interesting day, with emphasis on the word "interesting." A midday hack of the Associated Press' Twitter feed sent the markets tumbling in eye-blinking fashion after a fake tweet involving two bombings at the White House were made. The report and tweet were quickly debunked, and the markets regained all of their lost ground, but it was something on the nature of a mini-flash crash.

When the markets weren't focused on the ongoing security issues with high-profile Twitter accounts, they were paying attention to key second-quarter earnings reports and new-home sales from the homebuilding sector. Both succeeded in pushing the S&P 500 (^GSPC 0.95%) higher, as the majority of S&P 500 companies are beating on EPS, and new-home sales pushed higher by 1.5% in March to a seasonally adjusted annual rate of 417,000.

Following the shenanigans, the S&P 500 finished higher by 16.28 points (1.04%) to close at, 1,578.78. In spite of the strong move higher, earnings news and economic data helped push these three stocks much higher than the S&P's roughly 1% gain.

The star of the day was streaming content provider Netflix (NFLX 4.15%) which shot out of a cannon for a second-straight quarter, advancing 24.4%, after reporting better-than-expected first-quarter results. For the quarter, Netflix tacked on 2 million domestic streaming subscribers and an additional 1 million internationally to boost its worldwide subscriptions to 36.3 million. DVD subscriptions dropped by 241,000. Revenue jumped to $1.02 billion from $869 million in the year-ago period and profit of $0.31 per share. Wall Street had only been looking for a profit of $0.19. In spite of these strong results, and a multitude of price target increases by brokerage firms, I stand firm in my assessment that Netflix is grossly overvalued and would recommend caution with the stock now over $215.

Handbag and accessories maker Coach (TPR 4.93%) shook off the rust and leapt 9.8% after reporting better-than-expected third-quarter results. Shares surged as buyers returned to what had been a weak domestic market in recent months. North American sales rose 7% to $792 million, while sales in China soared 40%. Overall, Coach reported revenue of $1.19 billion and EPS of $0.84 -- 10% higher than the year-ago period. Wall Street had projected a profit of only $0.80 on $1.18 billion in sales. Coach has incredible brand value and a perfect price niche that puts it within most people's budgets, as this report showed. It may have significant long-term upside even following today's beat.

Finally, homebuilding stocks Lennar (LEN 5.20%) and PulteGroup (PHM 4.98%) both jumped notably higher following the aforementioned strong new-home sales data. Lennar managed to outdo PulteGroup by a hair -- 6.9% versus 6% -- but the thesis for the sector remains the same: Stronger home sales and less inventory will lead to higher selling prices and better homebuilding margins. If homebuilders can keep from flooding the market with supply they have a pretty decent shot at maintaining their pricing power. The question is, can they resist the temptation?

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,978.73 (0.95%) $37.25
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$187.83 (4.15%) $7.49
Tapestry, Inc. Stock Quote
Tapestry, Inc.
TPR
$31.52 (4.93%) $1.48
PulteGroup, Inc. Stock Quote
PulteGroup, Inc.
PHM
$42.97 (4.98%) $2.04
Lennar Corporation Stock Quote
Lennar Corporation
LEN
$75.73 (5.20%) $3.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.