Macro Wrap – Mega-Cap Winners in 2013, $HPQ, $CELG, $PCLN

by Enis July 18, 2013 7:31 am • Commentary

With not much new to report on the macro front (little movement among asset classes overnight), I wanted to focus a bit more micro in the heart of earnings season.  Specifically, what are this year’s best performing stocks in the mega-cap space?

Among the 100 largest stocks by market cap in the S&P 500, here are all of the stocks that are up more than 40% year-to-date:

  1. HPQ – Up 85% so far in 2013.  Restructuring and cost cutting has been the major theme.  Its end markets are still in decline (as last week’s 10% decline in PC sales, or INTC’s earnings last night demonstrated), but investors are paying up for the free cash flow generated by the business, regardless of the lack of growth.  Our recent thoughts here
  2. CELG – Biotechs have been the best performing sector among the mega-caps this year, with CELG, GILD, and BIIB all posting 50%+ returns year-to-date.  CELG is the leader, up 74% in 2013, and made a new all time high last week on strong drug data.  Earnings are July 25th.
  3. GILD – Up 57% in 2013.  I discussed biotech valuations a couple months ago, and still think they’re more reasonable than most other large cap stocks.
  4. BIIB – Up 53% in 2013.  Stock reports earnings on July 25th.  Has not approached its May high like GILD (or CELG, which broke it), so showing some relative weakness recently compared to the other 2 big winners.
  5. PCLN – Up 46% so far this year.  PCLN is 10% from its all-time highs reached in April 1999, shortly after its IPO.  It has moved higher on its last 3 earnings reports after getting hit on European weakness in mid-2012.  It reports in early August.
  6. MET – Perhaps the most surprising on this list, as it has rallied with no fanfare, up 45% in 2013.  One of the largest insurance companies in the world ($52 billion market cap).  The stock is right at its high from 2011.  This is a low P/E name (9x) with low earnings growth (5% per annum) that has attracted value investors this year.

There are only 5 stocks in the S&P 100 that are down 1% or more in 2013.  The worst performer is AAPL, down 19% (even after its recent rally).  FCX is down 15%, and ORCL, CAT, and DE are all down around 3%.  AAPL’s troubles are well known, while the other 4 have been hurt by weak international business trends.

Who will be the winners and losers of the second half?  This earnings season might lead to some kickoff moves that establish new trends and themes.  We hit the meat of the reports next week.