U.S. stocks have tumbled 7.7% from their 52-week high two months ago, as investors moved out of riskier assets on signs the economy is slowing.
The S&P 500 Index, the benchmark for most Americans' equity investments, is now little changed in 2011 after two years of gains.
Still, so-called defensive sectors, including health-care, consumer-staples and utility stocks, are posting big gains after ranking as bull-market laggards earlier in the year. In 2011, S&P 500 health-care shares have delivered median returns of 12%, the best of the 10 largest investment categories for stocks.
Investors are more pessimistic than optimistic today. The list of concerns is piling up. Europe's debt woes, driven by Greece, threaten to stall economic growth in a region that's as large as the U.S. Japan just sank into a recession because of an environmental catastrophe, and China, the engine of global growth, is slowing amid higher interest rates.
Those headwinds are shifting the focus to U.S. stocks, which are being supported by fat profit margins, accommodating monetary policy and an upcoming election year, in which the state of the economy will take center stage, putting pressure on politicians to support business. As a result, the best-performing large-caps of 2011 are the true growth stories.
Below is closer look at these top stocks.
10. CBS Corp. owns television networks, online media sites and billboards. It's known for top-rated shows including the prime-time "Survivor" and "The Young and the Restless" soap opera. The company's stock has advanced 41% in 2011 on improved advertising rates and outstanding operating results.
Earlier this year, the CBS television network sold ads at rates that were 40% higher than during last spring's "upfront" period. That's when advertisers purchase commercial time for the current TV season. What's more, the network was ranked as No. 1, as compiled by Nielsen Co.
Analysts have been optimistic about the company as well, with Morgan Stanley naming it a 2011 Best Idea. That call proved prescient. CBS's adjusted first quarter earnings more than quintupled even as sales declined marginally, but exceeded expectations.
Despite the big gain this year, the stock is still reasonably priced, costing a forward earnings multiple of 12, a 33% discount to peers.
9. Teradata provides enterprise-data warehousing services, as well as analytics and consulting services to its business customers.
Its stock has rallied 40% in 2011, outperforming its peers by a wide margin, and reached a 52-week high June 24.
Teradata has benefited from the red-hot "cloud-computing" push, in which companies store information in remote locations instead of their own costly data warehouses. Already this year, Teradata closed a $525 million purchase of cloud-based marketing software maker Aprimo of Indianapolis and a $263 million deal to buy San Carlos, Calif.-based Aster Data Systems Inc.
The company's first-quarter adjusted earnings per share advanced 10% as sales grew 18%. Both figured exceeded consensus projections. To be sure, Teradata is approaching analysts' median target, suggesting a possible cap in upside.
8. United Health is the first of many health-care outperformers on the top-10 list. The health-insurance and benefits-manager's stock has appreciated 40% in 2011. It's produced an annualized return of 18% since 2008.
UnitedHealth's operations give it a massive advantage over its peers -- it has 77 million Americans as customers. The big question remains the changing state of health-care reform legislation, though it seems the company has been able to adapt. That has pushed up the stock price the most.
Last quarter, net income gained 13%, and recent dividend increases, higher earnings guidance and strong operating results have buoyed the stock in 2011 as investors sought resilient growth stories.
7. Moody's is a data and fixed-income ratings company, along with Standard & Poor's, one of the most trusted ratings agency in financial markets, despite heavy criticism pertaining to the subprime debacle.
Warren Buffett, once a major shareholder through Berkshire Hathaway(BRK.B), has pared his holdings over the past couple of years, which is unfortunate for the Oracle of Omaha since Moody's stock has popped 50% in 2011.
Still, Berkshire is still the largest shareholder, with 12% of shares outstanding, so Buffett has profited from the rebound. Moody's receives mixed reviews from equity analysts, with four "buy" calls and five "hold" recommendations.
6. Aetna is a health-care benefits company, serving more than 35 million people. It offers health insurance to employer groups, individuals and government units. Its stock has surged more than 40% in 2011.
Industries, including health insurers, are in favor. Health-care companies Humana and UnitedHealth, for example, have surged this year, after it was clear a slate of reforms wouldn't hurt companies' bottom lines.
Aetna's management provided updated guidance to investors on April 28, predicting slightly lower full-year revenue, but $4.20 to $4.30 of operating earnings. That attracted investors seeking stability amid a soft patch in the economy.
5. Netflix has a mail-DVD-rental and streaming businesses. It ranks as one of the best S&P 500 stocks in 2011, with a 45% gain, the second-best over a one-year span and No. 1 over a three-year span.
Such performance has elicited criticism from those who believe Netflix is overvalued and the stock is doomed to fall. But Netflix is adding subscribers at a break-neck pace, even as competitive threats emerge. Last week, Mark Zuckerberg disclosed at a conference that Facebook, previously named as a major competitive threat, is in talks with Netflix to integrate its streaming service into the new media network, a potential game changer.
Netflix's adjusted first-quarter earnings soared 88% to $1.11, beating estimates, as sales gained 46% to $706 million.
4. El Paso is an oil and gas company, but its stock has rocketed (up 42% in 2011) not only due to improved operating performance, but also its split up of the company into two separate publicly traded companies.
Those two are El Paso, a domestic exploration and production company, and El Paso Pipeline Partners(EPB), a master limited partnership that has retained the natural gas pipeline assets. MLPs pay large dividends and receive special tax treatment.
While this move is sensible, allowing the company's main business to separate and focus while cutting down on unnecessary bureaucracy and costs, strong operating performance has also propelled shares in recent weeks. El Paso's adjusted first-quarter earnings, at 30 cents a share, marked a decline from the year-earlier tally, but beat analysts' estimates.
Besides the split-up, the company has been doing well. Customer growth over the past five years has averaged 2.3%, three times the industry average. As the economy accelerates in the West Texas and Southeastern New Mexico region -- unlike elsewhere in the country-- companies such as El Paso stand to gain.
3. Biogen Idec is a biotechnology company, developing drugs for neurological disorders and other diseases.
The company's stock has doubled in the past 12 months and has advanced 48% in 2011, outperforming peers. The recent approval of a new five-year marketing plan for multiple-sclerosis drug Tysabri in Europe and a positive study for Avonex, another multiple sclerosis drug, have attracted investors.
Biogen's treatments have been delivering solid sales growth. First-quarter net sales advanced 8.5% and adjusted earnings climbed 26%. Both figures exceeded analysts' expectations.
2. Humana is a health- and supplemental-benefits company.
The company's stock has appreciated 47% in 2011 and 66% over a 12-month span. Like other health-care companies, including UnitedHealth and Aetna, Humana has been steady, if unappreciated, since the recession. Its sales have risen 10%, annually, since 2008 and its stock delivered annualized gains of 19% over that span.
It is still reasonably priced, at less than 11-times forward earnings and 5.8-times cash flow. Those multiples represent respective peer discounts of 27% and 47%. First-quarter net income jumped 22%.
1. Cabot Oil & Gas produces and stores natural gas for resale. Its realized natural-gas price fell 28% in 2010, but hedging helped offset that drop.
Cabot is involved in the Marcellus shale project. As a result, Morgan Stanley expects Cabot to boost total production 40% during 2011. Recent Middle East turbulence should benefit the longer-term demand for natural gas, which, unlike oil, is overflowing in the U.S. Management recently stated that production rose from 310 to 400 million cubic feet per day of natural gas from its Marcellus property, helped by a compressor station upgrade.
Cabot's stock has risen 61% so far in 2011.
Adjusted first-quarter earnings decreased 52%, exceeding analysts' expectations by a huge margin.
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