Standout Stocks in the First Half

Posted by: Ben Steverman on July 1, 2008

Now that the year is halfway through, I went hunting through the S&P 500 index, looking for stocks that somehow did well despite headwinds for their sectors and industries.

The clearest standout may be Hudson City Bancorp (HCBK), the only bank in the S&P 500 with a successful first half of the year. It’s up 11.1% so far this year.

In consumer staples, aside from a few acquisition candidates — i.e., Wrigley (WWY) and Anheuser-Busch (BUD) — the best performer was, as expected, Wal-Mart (WMT), with a 18.2% gain. I was surpised however with Kroger (KR), up 8.09%, the second best performer in the sector. Estee Lauder (EL) found a way to rise 6.51%. I didn’t know make-up was a staple.

The industrial sector includes airlines, and in this industry the undisputed standout is Southwest Airlines (LUV), which somehow managed to post a 6.9% gain despite record oil prices.

In energy, all but just a few stocks gained. So I looked for the standout losers: The refiners lost ground, of course, but also Exxon Mobil (XOM) posted a 5.93% decline.

The consumer discretionary sector has done poorly in 2008, but it had a surprising number of standouts:
Retailer Big Lots (BIG) was up 95.4%; toy company Hasbro (HAS) rose 39.6%; Darden Restaurants (DRI), the owner of Red Lobster and Olive Garden, gained 15.3%; H&R Block (HRB) was up 15.2%; Wendy’s International (WEN);
the TJX Companies (TJX), the owner of T.J. Maxx and Marshalls, is up 9.54%.

Apparently, a great brand name — especially a reputation for providing consumers with good values — can keep a company’s stock afloat even in tough times.

Reader Comments

Bud Labitan

July 2, 2008 9:28 PM

What we view as tough times may soon be viewed as "buying opportunities" for Warren Buffett and other value investors. After all, some of their best purchases were made during the stagflationary period of the 1970's.

I think Buffett and Munger invented an amazing Behavioral Finance Formula or Process that is underappreciated by the business and academic communities. On paper as early as the 1977 BRK annual letter, their work in designing a mixed qualitative + quantitative formula may be worthy of a Nobel Prize in Economics and Behavioral Finance. So, in my new self-published book "The Four Filters Invention of Warren Buffett and Charlie Munger" ( www.frips.com ) I examine each of the basic steps they perform in "framing and making" an investment decision. I made this book a small and focused look into this amazing invention within "Behavioral Finance."

Buffett mentions the Four Filters this way: "Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag."

In my view, the genius of Buffett and Munger's four filters process was to "capture all the important stakeholders" in one "multi-variable" equation.

Imagine...Products, Enduring Customers, Managers, and Margin-of-Safety... all the important stakeholders for business success in one mixed "qual + quant" formula...The genius of the Munger and Buffett collaboration. And, quality bargains at 50 cents on the dollar may soon appear; Use the Four Filters!

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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