What worked in 2009
Just look at the top 10 S&P gainers. They made it just by surviving.
What worked in 2009? You need look no further than the top 10 gainers in the S&P 500 to realize that what happened in 2009, when it comes to the winners, is that they survived.
Seven of the top 10 stocks rallied because their insolvency was off the table. Let's take them one by one.
is XL Capital (XL). Here's
a traditional insurer of many different kinds, including the kinds that got in
a lot of trouble during the downturn, as well as a company with a portfolio
that might have been hurt by the toxic bonds of the era. It rallied 395%, in
part because the shorts lost the bet. They are still trying, but from these
levels they might have some success.
No. 2 is Tenet Healthcare (THC), which got a total reprieve from the health-care bill. Hospitals got a big lift from Obama, and this one, the weakest of the bunch, got the biggest lift: 368% gain.
Next comes Advanced Micro Devices (AMD), that's right, AMD, one of my favorites, which vaulted 348% because it augmented its balance sheet -- survival off the table -- and dominated in graphic chips, along with Nvidia (NVDA), as Intel (INTC) gave up. AMD could go higher.
Ford (F) is fourth. I have liked the preferred shares -- still do, since they can be called at a higher price, which makes sense given so many dividends in arrears. I believe Ford had a huge fourth quarter, not at all augmented by "Cash for Clunkers," since its strong sales growth came after the program ended. Its profit per car increased courtesy of lower labor costs and better inventories, which enabled fewer discounts. I would continue to buy the Ford preferred, even with the common shares having rallied 336%.
Fifth is Genworth Financial (GNW), which was supposed to be wiped out by its portfolio, but instead it tapped into the equity market to make its solvency a given. The whole story to the downside may have been overdone, as the company's prospects were never as bad as portrayed. Maybe that's why it soared 301%.
Micron Tech (MU), the sixth-best performer, jumped 285%, in part due to pure economic growth. You get a DRAM rally when you have gadgets in demand, and that's exactly what we got. This Micron rally was a quiet because it was out of sync with the notion that the economy had strength and the consumer would spend. It was, in part, a big play on the strength in retail that the pundits denigrated all the way.
Western Digital (WDC), the seventh best, rallied 285%. The disc-drive manufacturer benefited from PC demand, which was spurred by the unlikely success of Windows 7, another surprise. I fear this stock has moved too high and is overextended, but the same thing could have been said 100% ago. I am so used to boom/bust cycles for drive makers because of the ease with which new plants can be built. But so far, the group's members have shown great restraint. (So have the NAND players, such as SanDisk (SNDK), which few thought could rally this much. For the record, I liked SanDisk, AMD, and Nvidia all the way and still favor the hated Nvidia.)
Eighth is Freeport-McMoran Copper & Gold (FCX). Here is a stock so broken by bolting hedge funds that much of its 228% gain came as a pure recovery from that aggressive selling. But a lot of it was the result of gold's resurgence as an asset class (think SPDR Gold Shares (GLD)) and also due to China's miraculous recovery to levels that are now higher than before the Great Recession. I believe FCX's performance can continue because I see a very, very high level of GDP growth in the first quarter, much higher than just about everyone else -- maybe as high as 4%.
Coming in at No. 9 is CB Richard Ellis (CBG), up 214%, as a direct play on the endless obituaries on commercial real estate. You know my feeling: The lack of new construction and the strength of the equity market could allow the REITs to have a huge year. Not long ago, I heard rumblings that Vornado (VNO), for example, was in trouble. The stock is near its 52-week high, and the company could easily raise more money in the market right now, as could Boston Properties (BXP). They are winners, they can cherry-pick good real estate easily.
Finally, there is Expedia (EXPE), up 212%. People thought the consumer wouldn't travel. Wrong! The consumer traveled cheaply, looking for bargains, as manifested by the spectacular run this stock had -- so spectacular that Credit Suisse (CS) downgraded it on Monday morning, a move I believe will prove to be a mistake, as the story just gets better and better, even if the economy improves.
There's lots to learn from here, much to balance against the negativity, and a lot of insight into 2010.
At the time of publication, Cramer was long Intel.
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