The Super Bowl of Stocks
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On Sunday Feb. 3 the championship game of the National Football League will be held. The Baltimore Ravens and the San Francisco 49ers will battle it out in the 47th Super Bowl for the ultimate prize, the Lombardi Trophy.
If the Super Bowl of stocks was played today who would be in the playoffs? Who would win and receive the "Lynch Trophy," named after the legendary Peter Lynch, one of the most successful stock pickers in history?
The ultimate performance gauge of a company is how much value it returns to its shareholders. Therefore, total return would be the logical choice to determine the winning stock. I'll limit the "league" to the S&P500 which is the index of the top 500 American companies by market cap. I will look at the four best stocks from the regular season to see who will make the playoffs and compete for the title.
During the calendar year 2012 the top four performers in the S&P500 were as follows:
1. PulteGroup (NYSE: PHM)
2. Sprint Nextel (NYSE: S)
3. Whirlpool (NYSE: WHR)
4. Expedia (NASDAQ: EXPE)
2012 regular season performance
The recovery in the housing market probably benefited PulteGroup, a holding company which has a presence in home construction and renovation. In addition PulteGroup has interests in financial services, which was the S&P500's top performing sector last year. Its total stock return for 2012 was 179%.
The company, which lost money from 2009 to 2011, reported a profit for the first nine months of last year. Earnings for the 4th quarter have not been reported yet, but the consensus estimate is for continued profitability and a 200% gain over 2011. Can the company keep it up during 2013? If the housing market continues its slow recovery it is likely to continue to return value to shareholders. So far the company is performing well in the playoffs --- the stock is up 16.5%.
Sprint Nextel had the next best performance during 2012 gaining 142%, although it reported a loss of $1 per share during the year, in-line with the results of 2009 to 2011. The company was in the headlines last year when a Japanese company, Softbank, announced plans to acquire a 70% interest in it, the number three wireless provider in the U.S.
The total value of the deal was estimated to be $20 billion. Sprint badly needs the cash infusion in order to pay down some of its huge debt load and offset the costs associated with the addition of the iPhone to its line-up. Year to date Sprint stock is down 2.6%. It is not performing well in the playoffs.
Next up in the 2012 standings is the appliance manufacturer Whirlpool with a gain of 115% in spite of a drop in earnings and revenue from 2011 levels and the fact that the company did not increase its dividend. However, projections are that EPS and revenue will start to grow again during 2013 as the economy heats up a bit and more people start to buy washing machines and clothes dryers. How is Whirlpool performing in the playoffs? The stock is up by 2.3% since Jan. 1.
Rounding out the top four is the on-line travel booking site Expedia, up 111% during 2012. Investors have been rewarded as the stock has outperformed the broader market by 2.5 times over the last two years. The company actually decreased its dividend in 2012, but earnings and revenue increased slightly. Consensus estimates are for a big jump in EPS during 2013. In the playoffs the stock is up 5%.
2013 playoffs performance
So it looks like PulteGroup would win this year's Super Bowl of stocks, beating Expedia in the championship game, and take home the Lynch Trophy based upon its performance in 2012 (+178%) and so far this year (+16.5%). I wonder who the bookies would bet on.
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