After a tough January, the S&P 500 (^GSPC +0.69%) bounced back sharply in February to stand once more at an all-time high. But some stocks have played a bigger role in the S&P's record moves than others, and topping the performance list among the 500 stocks in the index were Forest Laboratories (NYSE: FRX), Nabors Industries (NBR +1.50%), Alexion Pharmaceuticals (ALXN +0.00%), and Actavis (ACT +0.00%).
Merger and acquisition activity often play a big role in explosive up moves for stocks, but the surprising thing about one particular transaction in early 2014 is that both the acquirer and the target saw strong gains. Two weeks ago, generic-drug maker Actavis (ACT) announced that it would buy Forest Labs (FRX) for $25 billion, with the deal including just over $26 in cash plus about a third of a share of Actavis stock. Often with buyouts -- especially those involving shares as part of the compensation -- the stock of the acquirer will fall after such an announcement. But investors love the move from both companies' point of view, as Forest (FRX) got a huge premium to the price at which its shares were trading before the announcement, while Actavis said that the deal will be immediately accretive to earnings and help the company build sustainable growth by expanding its reach beyond generics to incorporate specialty pharmaceuticals as well. As a result, Forest Labs shares are up 62% year-to-date, while Actavis has seen gains of 31%.
For Nabors (NBR), strong earnings led to most of the land-based oil and gas drilling company's gains of 35%. For a long time, drilling activity on land has paled in comparison to offshore drilling, as low natural-gas prices have caused many exploration and production companies to pull back on their capital expenditures and go into cash-preservation mode. Yet Nabors has started to see the domestic drilling market improve, and even more importantly, it has seen its international business become more profitable, with record margins that were better even than the boom year of 2008. If gas prices stay on the rise, Nabors could continue to see solid gains.
Meanwhile, Alexion (ALXN) has risen 33%, with its fourth-quarter earnings report also providing most of the lift to the biopharma stock. With Alexion relying on Soliris, the only drug for which it has received FDA approval, news that sales rose 38% was well-received, and a 45% jump in net income was also greater than expected. Yet Alexion's biggest surge came from its guidance for the full 2014 year, as investors weigh the newest orphan-drug indication for Soliris in helping prevent delayed graft function in those who've received renal transplants. Even though diseases like atypical hemolytic uremic syndrome and paroxysmal nocturnal hemoglobinuria aren't household names, Alexion has done a good job of building revenue for the drug that treats them, and as long as Soliris keeps performing well, Alexion shareholders will share in its success.
Of course, anything could happen in the future to reverse the big gains that these four stocks have seen. But with the wind at their backs, these four companies have every ability to build on their gains and seek even greater opportunities for the future.
