The markets have taken a scary turn over just the past few weeks, and investors' confidence is understandably shaken. In fact, because of the sharp sell-off, the major indexes, including the Dow Jones Industrial Average and the S&P 500, are now negative for the year. However, not all stocks are posting losses so far in 2014. One stock that has registered a solid gain is Applied Materials (AMAT 0.34%), provider of manufacturing equipment to the semiconductor, solar, and electronics industries.

So far this year, Applied Materials is up 13%, which makes the stock a strong outperformer, considering the broader market's losses. Read on to discover why Applied Materials is showing strength, while so many other stocks are looking weak.

Business conditions firming across its key markets
Applied Materials has posted strong operating results over the first several months of the year. Its products are seeing strong demand, because it caters to manufacturers of things such as smartphones, flat-screen televisions, and solar panels, and it helps to make these products more affordable to consumers and businesses.

Over the past two years, Applied Materials' strategy was to boost profitability by focusing investment in the most productive areas. The company has stepped up investment in research and development in a few key areas such as display technologies and semiconductor equipment for smartphones, all in an attempt to position the company to successfully integrate with Tokyo Electron. The two companies are set to merge, and Applied Materials anticipates that the deal will close by the end of the calendar year.

From the company's results, it appears that its efforts have worked. Last quarter, Applied Materials produced its seventh consecutive quarter of higher operating margins. Management noted in the most recent conference call with analysts that the company is seeing sustained momentum in mobility and connectivity, which should drive demand going forward.

Growth is fueling the stock's rally
As a result, revenue over the first three fiscal quarters is up 23% versus the same period one year ago. Earnings per share are up an astounding tenfold in that time. The company benefited from an easy comparison period, since the 2013 nine-month period was weighed down by a large $278 million impairment charge and $33 million in restructuring charges. Still, even when adding these back to operating results, Applied Materials' operating profits more than doubled through the first three quarters, because of the company's strong top-line growth.

Investors are looking forward to a good finish to the remainder of the year. Applied Materials' business outlook for the fiscal fourth quarter calls for 10% to 17% revenue growth, and 32% to 53% earnings growth, year over year. Should Applied Materials successfully hit its forecast, it's reasonable to think that the stock could have further momentum, with such strong growth rates.

Foolish thoughts
Applied Materials is seeing strength across its products, but two of its highest-performing areas right now are semiconductors and display. The continued boom in smartphones and a product refresh cycle in personal computers are two tailwinds that should continue to benefit the company. One area in which Applied Materials is not doing so well right now is the solar market, where management noted a downturn last quarter. But the company is not heavily exposed to solar, so the effect should be limited.

Applied Materials' focus on precision materials engineering has paid big rewards. Revenue is soaring, and margins are expanding. The company will benefit going forward, once the integration with Tokyo Electron is complete. The merger should drive even greater scale benefits and market share gains in the future.

Applied Materials has had a good year, but the run might not be done just yet. The company expects growth to continue for the remainder of the year, meaning there might be even greater gains in store for the stock.