Let’s face it: 2015 has not been the best of years. The enormous six-year bull run was reined in, as a vicious cycle of seemingly never-ending woes kept Wall Street under pressure.
It all started with the collapse in oil prices. Then came the instability in Greece, global growth concerns and the uncertainty of the Fed rate hike. Persistent weakness in China and the slump in commodities aggravated the situation.
Additionally, the U.S. economy, which was growing at the fastest rate in over a decade in 2014, cooled off substantially this year. While solid job growth, gradually rising inflation, a recovering housing market, robust auto industry and cheap fuel were definitely driving growth, persistent weakness in manufacturing activity, plunging oil prices, and shaky consumer confidence posed threats to economic expansion.
The setback has been more prominent in the small-cap and mid-cap space with the Russell 2000 index tumbling 4.6% and S&P Mid Cap 400 plunging 2.7% in the year. The large-cap space has delivered mixed performances. While the Dow Jones Industrial Average lost 1.2%, S&P 500 was relatively flat and the Nasdaq Composite was up nearly 7%.
In spite of the overall weakness in the broader markets, let’s not forget that the Federal Reserve displayed enough confidence in the U.S. economy to go ahead with a unanimous decision to raise rates after almost a decade. Winners were also to be seen scattered across the equity universe. They not only topped the market but also look good going into the New Year, We have highlighted the best 15 stocks of 2015 sporting either a Zacks Rank #1 (Strong Buy) or #2 (Buy) and backed with a solid industry Rank.
The above table clearly demonstrates the sectors that were the clear winners in 2015. Medical (healthcare), technology, and consumer discretionary were on top and their stocks mainly outperformed the others this year.
Healthcare Wins Back Investor Confidence
After a stellar run, the healthcare sector was badly hammered in September, wiping out all the gains it made early in the year after the Democratic presidential candidate Hillary Clinton tweeted about "price gouging" that led to fears of heightened government regulation or pricing interference in the near future. However, the sector made a robust comeback after the brutal sell-off, thanks to attractive valuations, strong earnings growth and encouraging industry trends.
Most of the real stars are from the biotech corner of the healthcare space. In particular, Dyax DYAX, Lexicon Pharmaceuticals LXRX, China Biologic Products CBPO, and Ligand Pharmaceuticals LGND more than doubled in 2015. Meanwhile, Eagle Pharmaceuticals EGRX, a specialty pharmaceutical company focused on critical care and oncology areas, saw a nearly five-fold price increase.
Technology Firing on All Cylinders
The technology sector has been riding high this year on gradually improving global IT spending, a strengthening economy and better job prospects. Growing demand for novel and advanced technologies such as cloud computing, big data, smartphones, high-speed fiber networks, and the Internet of Things are fueling growth across the sector.
Additionally, most of the tech giants are sitting on a huge pile of cash and are in a comfortable position to increase payouts to their shareholders. The cash reserves will ensure that these companies are not plagued by financial trouble even in a rising interest rate environment.
A technology service provider – Globant GLOB – was the top outperformer, gaining over 140%. Ebix EBIX and Qunar Cayman Islands QUNR also doubled their worth this year.
Consumer Discretionary Thrives
The sector has been a consistent outperformer since the start of 2015 as cheap fuel and rising income have raised consumers’ spending power, leading to fatter wallets. This along with an improving U.S. economy and rising consumer confidence is making the segment a great space to stay invested in. This trend is likely to continue in the next year giving a boost to consumer stocks.
Notably, Smith & Wesson Holding SWHC, American Woodmark AMWD and Activision Blizzard ATVI have gained immense strength and are expected to continue to lead the market in 2016 as well.
Bottom Line
Investors should definitely look at these stocks as these could continue their strong performances heading into 2016 given that the same trends are likely to be at play for some time to come.
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