Remember the cold snap of Q1? Well, spring wasn’t far behind for the U.S. stock market but the shivers continued to be felt all year round on the international front. Still, the U.S. economy did not stop short of braving an uphill ride and 2014 turned out as another banner year for the country’s stock market.
So what were the challenges? A slowdown in China and other key emerging economies, turmoil in Russia, a struggling Europe, recession in Japan, geopolitical tensions and if these weren’t enough, there was the biggest shocker – oil prices plummeting.
The resilient U.S. surprised with better job prospects, stepped-up economic activities, better-than-expected GDP numbers, improved business, renewed optimism in the housing recovery, rising wages and cheap fuel. In fact, the economy recorded back-to-back quarters of the strongest growth in over a decade and is now well on track for the best annual job growth since late 1999.
Quite naturally, consumer sentiment jumped to 93.6 in December from 88.8 in November, as per Thomson Reuters/University of Michigan. The final reading represents the highest level in nearly eight years.
While the overall gains were broad based, large caps actually led the way higher with the Nasdaq Composite, S&P 500 and Dow Jones Industrial Average, returning respectively 15.1%, 12.6% and 8.9% this year. The S&P Mid Cap 400 Index gained 9.3% in the year while small cap stocks, as depicted by the Russell 2000 index, added 4.4%. Further, impressive performances came from almost all sectors save energy, which has been sliding with the plunge in oil prices.
It’s hard to pick star performers from many winners across sectors, yet we present 14 of 14. These are the 14 stocks that not only crushed the broad market returns by wide margins, but also have the potential to outperform in the New Year as well.
So what makes these a cut above the rest? First, a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold). Second, a solid industry rank. Then, their positive earnings surprise in the last four quarters and finally, their positive earnings estimate revisions.
This is quite a combination to look out for in stocks, especially for investors beefing up their portfolio in the final few days of this year. Take a quick look at the best 2014 stocks and their key metrics in the table below:
|
Company Name |
Ticker |
YTD Return |
Zacks Rank |
Industry |
Industry Rank |
Positive Est. Rev. for Current Quarter |
Positive Est. Rev. for Current Year |
Average Earnings Surprise Over the Past 4 Quarters |
|
MA-COM Technology Solutions |
MTSI |
89.35% |
1 |
Semiconductor |
Top 42% |
4.20% |
10.71% |
7.74% |
|
InterDigital |
IDCC |
84.33% |
1 |
Telecom |
Top 22% |
68.63% |
11.54% |
36.51% |
|
United Continental Holdings |
UAL |
72.56% |
2 |
Airlines |
Top 6% |
8.04% |
2.04% |
6.40% |
|
Taser International |
TASR |
69.46% |
1 |
Industrial Products |
Top 8% |
3.33% |
3.82% |
71.39% |
|
Burlington Stores |
BURL |
49.19% |
1 |
Retail |
Top 31% |
3.38% |
5.63% |
27.02% |
|
Alcoa |
AA |
48.82% |
3 |
Mining |
Top 38% |
6.89% |
2.30% |
33.19% |
|
Ryanair Holdings |
RYAAY |
48.54% |
1 |
Airlines |
Top 6% |
65.71% |
5.18% |
4.82% |
|
Headwaters Inc. |
HW |
46.99% |
1 |
Building & Construction |
Top 29% |
7.14% |
10.53% |
230.06% |
|
G-III Apparel |
GIII |
34.61% |
1 |
Consumer Discretionary |
Top 40% |
2.99% |
6.42% |
64.40% |
|
Cintas Corp. |
CTAS |
33.95% |
1 |
Industrial Products |
Top 2% |
3.28% |
4.02% |
3.20% |
|
Jabil Circuit |
JBL |
28.04% |
1 |
Electronics |
Top 5% |
25.42% |
11.55% |
60.54% |
|
Spectra Energy |
SEP |
27.83% |
1 |
Oil & Gas |
Top 22% |
3.33% |
3.19% |
8.67% |
|
Red Hat |
RHT |
26.86% |
3 |
Software |
Top 37% |
2.95% |
2.88% |
9.86% |
|
Relypsa Inc. |
RLYP |
23.04% |
3 |
Medical |
Top 14% |
10.78% |
6.68% |
7.19% |
Clearly, almost every sector gave a winner or two, but stocks in the airlines, computer and technology, and industrial products spaces outperformed per our criteria.
Airlines Fly High on Cheap Fuel
The airlines industry is largely benefiting from lower fuel prices and a strengthening economy, and this trend is likely to continue in the next year as well. As per the International Air Transport Association (IATA), global airlines are expected to earn a profit of $25 billion in 2015, up from $19.9 billion projected for this year. Additionally, the airlines across the globe will likely see the strongest profit margin in more than five years in 2015 due to cheap oil and higher demand.
While Hawaiian Holdings (HA), Southwest Airlines (LUV) and American Airlines (AAL) more than doubled this year and led the space, United Continental (UAL) and Ryanair (RYAAY) are expected to outperform in the coming months given all the favorable metrics.
Technology Rebounded Strongly from 2013 Lows
A number of industries in the broad computer and technology space has shown immense strength primarily on a flurry of mergers & acquisitions and rise in global IT spending. According to Gartner, global IT spending would grow 2.1% in 2014 and then rise to 3.7% in 2015.
Most of the growth this year will likely come from enterprise software and IT services that are expected to grow 6.9% and 3.8%, respectively. Global spending on devices, including PCs, mobile phones and tablets, would grow 1.2% while other corners of the technology space – data center systems and telecom services – will likely see a rise in spending by 0.4% and 0.7%, respectively.
In particular, semiconductors like MTSI also enjoyed a strong rally on encouraging fundamentals, solid corporate earnings, strong outlook and investors’ continued appreciation of value-centric traditional stocks.
Industrial Products Gained Solid Momentum
With the economy expanding at a solid clip, the industrial sector has been on the rise this year. This is especially true as manufacturing output climbed 4.8% in November over a one-year period and edged past its pre-recession peak seen in December 2007.
Despite global slowdown concerns and a strong dollar, production has expanded across the board with manufacturers, utilities and mining working closer to full capacity in more than six years. This trend is likely to continue in the coming months giving a boost to the industrial stocks like Alcoa (AA), Taser International (TASR) and Cintas (CTAS).
Bottom Line
As the U.S. economy is treading on a full-growth path and consumer confidence is rising, the stock market should continue to surge in 2015. Our choice of stocks also will, hopefully, be high fliers with above-market returns next year too.
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