Top 10 Performing Large Cap Stocks Through First Half of 2013

BA is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As the first half of 2013 ends, let's look at the year-to-date top performing (and profitable) large cap stocks. Our goal is to identify some winners (and/or their peers) that look like winners going forward.

There are 557 large cap stocks (market caps of $10 billion plus) in the finviz.com universe. I narrowed these down to those with a positive P/E (profitable over trailing twelve months), of which there are 492. Had I not put that speed bump in place, electric vehicle maker Tesla Motors would have crossed the finish line first, with a 222% return. 

Top 10 performing profitable large caps 

Company YTD Return (%) P/E Fwd. P/E

5-Yr PEG

EPS growth this yr (%) EPS growth next yr (%)

ROE (%)

D/E
1. Netflix 132.2 522 68.0 8.0 (93) 121 3.3 0.86
2. Sony                 89.3 39.9 14.9 0.9 109 204 4.0 0.54
3. Green Mountain Coffee Roasters  78.6 28.4 20.4 1.2 74.0 14.6 17.8 0.15
4. Delta Air Lines 57.5 17.3 6.0 0.3 17.8 14.6 (67.9) N/A
5. LinkedIn (NYSE: LNKD) 57.3 685 84.0 2.0 46.2 43.9 4.8 0
6. CME Group  53.1 29.3 20.8 1.8 (50.3) 15.8 4.1 0.13
7. Hertz 52.2 36.1  10.0 0.4  35.0 30.6 15.1 8.0
8. Life Technologies  51.0 31.4 16.0 1.8 17.1 9.9 8.9 0.51
9. Celgene (NASDAQ: CELG) 50.9 34.9 16.5 0.9 15.8 20.5 24.8 0.56
10. Ryanair 49.5 19.4 14.9 1.2 3.5 15.8 17.0 1.1

Yahoo! Finance & finviz.com; D/E is debt/equity; data to June 27.

Just because I'm not highlighting a stock doesn't mean it doesn't look attractive going forward. 

Coffee: an attractive space

In addition to coffee being nearly recession-proof, there's another good reason to add a coffee player to your portfolio: Green coffee bean prices are at a nearly four-year low, which should continue to give a nice profit boost to large buyers of the commodity. That's assuming they don't pass that cost-savings through to consumers, and -- other than select packaged coffee producers, such as JM Smucker -- that's not been in their game plans. In fact, Starbucks (NASDAQ: SBUX) just increased prices last week. 

In addition to Starbucks, single-serve king Green Mountain Coffee Roasters, which produces the Keurig and Vue machines, and Dunkin' Brands should benefit. Dunkin' is an East Coast-rooted chain, traditionally focused on coffee and donuts, that's now expanding to the U.S. West. 

Some basic metrics: 

Company YTD Return (%) P/E Fwd. P/E

5-Yr PEG

EPS growth this yr (%) EPS growth next yr (%) Operating Margin (ttm) Profit Margin (ttm)

ROE (%)

D/E
Green Mountain      78.6 28.4 20.4 1.2 74.0 14.6  16.1  9.7 17.8 0.15
Starbucks 23.4 33.4 25.0 1.6 10.5  20.4   14.1  10.8 29.0 0.10
Dunkin' Brands 31.4  46.1 23.9 1.8 166  18.4  39.2  15.9 19.2 5.4

Yahoo! Finance & finviz

Let's get this one out of the way: Dunkin' is a pass for now. With the exception of its margins (which will likely come down as it offers more food items), its numbers are uninspiring. It's much smaller than Starbucks -- $4.6 billion market cap to Starbucks' $49.2 billion -- yet its projected EPS growth for next year is slightly less than Starbucks'. And, while debt is cheap these days, it's a negative that it's leveraged to the hilt (5.4 debt/equity).

Starbucks makes the best long-term "core holding," in my opinion. Granted, it might not be able to outperform to the same degree as Green Mountain over the shorter-term. However, it's a time-tested leader, and a good match for long-term investors who don't want to concern themselves with some of the potential drawbacks of Green Mountain, namely the ever-present threat of its K-Cups' margins being squeezed by increasing competition. Starbucks' ROE says it all: The company is very efficient at using shareholders' money to generate profit. 

Celgene 

Celgene is a $49.8 billion market cap biotech company focused on treatments for cancer and immune-inflammatory related diseases. 

Its drugs include Revlimid, Thalomid, Vidaza, Abraxane, Isodax, and Pomalyst. Abraxane is used to treat breast and lung cancers, while the others treat various blood cancers. Revlimid, the world's best-selling multiple myeloma drug, is its blockbuster -- accounting for 68% of revenue in 2012. The drug is patent protected until 2024 in the EU and 2027 in the U.S. 

Celgene is up 40% since my favorable article on January 7. In March, I wrote, "5 Reasons Celgene Remains a Long-Term Buy." Those reasons, which still hold true, are:

  1. Highly innovative management
  2. No big patent cliffs approaching
  3. Strong late-stage pipeline
  4. Solid metrics 
  5. Reasonable valuation 
Celgene continues to be reasonably valued on a forward P/E and 5-year PEG basis. EPS growth is projected to be about 20% next year, and average 22% for the next five years. Its operating and profit margins (ttm) are a fat 36% and 25%, respectively. 

LinkedIn

LinkedIn is an online professional networking site, providing services that are needed in all economic climates. Not only was it a first-mover, but it can be considered an "only-mover," as it has no notable peers.  

LinkedIn is often compared to Facebook and other sites used for social reasons. It's a considerably different beast. Notably, its revenue is not ad-driven, as is Facebook's -- only 23% of LinkedIn's Q1 2013 revenue came from ads. This is a service people (employers in particular, as "hiring solutions" accounts for 57% of revenue) are willing to pay for. Additionally, it's less subject to fickleness, as there's no "cool" factor needed.  

The PEs and PEG indicate the stock is pricey. However, this is usually going to be the case for growth stocks with considerable future potential. Additionally, forward-looking metrics (forward PE, 5-year PEG) are based on analysts' estimates. While analysts usually do a decent job of projecting a company's earnings one year out, projecting them further out -- such as five years -- is a different story. 

Two bear arguments are that the U.S. market is nearly saturated and there's a lack of user engagement. These are factors that need to be monitored. However, the saturation point doesn't take into consideration expansion beyond the company's current focus or the international opportunities. LinkedIn is expanding its services. For instance, it recently acquired Pulse, which will allow users to create customized news feeds. It's also been growing international revenue, with 38% of its Q1 revenue coming from international markets.

Bottom line

Often times in the stock market, "winners keep winning," so one can find future outperformers among current ones. Celgene, Starbucks, and LinkedIn have performed well during the first half of 2013. More notably, however, they've been longer-term winners too. 

Celgene and Starbucks look attractive as long-term core holdings. Both are in attractive spaces, have solid growth potential ahead, and sport solid metrics. They both have strong ROEs, indicating they're very efficient at generating profit from shareholders' investments. LinkedIn has super-strong growth and its prospects are rosy. However, the stock is very richly valued. Its best fit is as a non-core holdings for non-risk-adverse investors who follow their holdings closely.

The U.S. government has piled on more than $10 trillion of new debt since 2000. Annual deficits topped $1 trillion after the financial crisis. Millions of Americans have asked: What the heck is going on?
The Motley Fool's new free report, "Everything You Need to Know About the National Debt," walks you through with step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read the full report!


BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Celgene, LinkedIn, and Starbucks. The Motley Fool owns shares of LinkedIn and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure