The S&P 500 (^GSPC 0.56%) have outperformed the Dow and other major-market indexes, actually posting a gain during the first quarter of 2014 and climbing about 0.5% from where they began the year. Yet even though those minimal gains are a far cry from the 30% returns that the index posted in 2013, they wouldn't have been possible without the contributions of Forest Laboratories (NYSE: FRX), Nabors Industries (NBR -1.71%), and Keurig Green Mountain (GMCR.DL), all of which have jumped more than 40% in the first quarter.
Forest Labs climbed 52% for the quarter after the company announced that Actavis had agreed to buy out the drugmaker. The buyout includes just over $26 per share in cash and about a third of a share of Actavis stock, bringing the total compensation to about $89.50 per share as of the time of the announcement. Since then, gains in Actavis shares have actually pushed Forest even higher, but few believe that there will be any impediment to the deal getting done. One benefit for the business will be effectively moving its legal domicile from the U.S. to Ireland, giving Forest's operations a tax advantage that its current domestic location doesn't allow. With a solid roster of approved drugs to offer, Forest will give Actavis instant growth potential without the pain and uncertainty that companies with only development pipelines create for would-be acquirers.
Nabors gained 46%, with much of the gains having come after the drilling company announced its most recent quarterly earnings. Land-based drillers had seen huge challenges from the plunge in natural-gas prices, which led to a dramatic restructuring across the industry for oil and gas exploration and production companies. As E&P companies cut capital budgets, Nabors and its peers suffered. But lately, higher natural-gas prices and a greater focus on oil and liquids have started to turn the tide for onshore drilling, and Nabors has seen even bigger margins than it did in 2008, which for many companies was the high-water mark for the industry. If the market has truly hit bottom, then Nabors could have plenty of room to run in the future.
The newly dubbed Keurig Green Mountain posted a 44% gain for the first quarter, with the bulk of the gains coming from the announcement that soft-drink giant Coca-Cola (KO 1.64%) had taken a 10% stake in the home-coffee-brewer maker's stock as well as reaching a 10-year partnership deal over its coming Keurig Cold home soft-drink machine. Investors took the move as a gigantic vote of confidence for Keurig Green Mountain, but with the new appliance not expected to come to market during 2014, shareholders in both companies will have to be patient before they'll see tangible results from the partnership.
Investors shouldn't count on huge further gains from these stocks, especially with Forest's upside limited to whatever Actavis can manage. Nevertheless, the S&P will have to see contributions like this from other stocks if it wants to have its bull-market streak reach a sixth year.