The top-performing S&P 500 stock year-to-date is up 114% while the top 10 are averaging gains of 88%, a seven-fold advantage over the S&P 500.
The top stocks in 2014 were a mix of airlines, healthcare, consumer discretionary and consumer staples stocks. Southwest Airlines is number one in terms of performance (subject to change with a few trading days left in the year) with two others also hitting triple digits – Electronic Arts up 107% and Edwards Lifesciences up 103%.
Meanwhile, you didn’t want to be invested in Transocean in 2014. It’s down 57% year-to-date, the worst performing stock in the S&P 500. It’s gotten hammered because of its reliance on energy producers for drilling contracts, contracts that haven’t materialized due to the fall in oil prices.
Warren Buffett is famous for his quote, “Be fearful when others are greedy and greedy when others are fearful.”
Should you be rushing in given many analysts are recommending investors sell its stock? Well, we definitely wouldn’t suggest putting all your money into RIG, but with a 10-year annualized return of negative 4.3%, reversion to the mean is looking more probable every day. Especially when you consider that T. Boone Pickens believes Brent crude will be at $90 or $100 per barrel within 12 to 18 months.
Transocean might be down but it’s hard to imagine the mid-cap energy stock is permanently out.
As for the top 10 performers, it’s hard to know if any of the names on this year’s list will be back in 2015. Certainly, Delta Airlines, which is on the list for the second year in a row — up 72% in 2014 and 129% in 2013 — is unlikely to make a third appearance.
If you had any of the top 10 in 2014 your clients probably did better than most. Of course, it’s possible to have done this by owning an ETF that tracks the S&P 500 itself.
Most advisors probably did the latter.