Amid nagging fears, U.S. financials found their footing

What are we looking for?

We continue this week's examination of the best- and worst-performing stocks in the first half of 2010. Having already highlighted the biggest winner and losers among Canadian stocks so far this year, we now turn our attention to the U.S. equity market.

Despite a 7.6-per-cent decline in the S&P 500 over the first six months of the year, there were opportunities for astute (or lucky) stock pickers to unearth some big returns. Today we look at the 20 biggest gainers on the S&P 500 in the first half.

The better half

Overall, 47 per cent of the S&P 500 posted first-half price gains, while 70 per cent outperformed the overall index.

And among the gainers, there were some very attractive returns to be found. More than 20 per cent of the index (105 stocks) rose more than 10 per cent over the six months; 55 of those gained better than 20 per cent, and 28 surged more than 30 per cent.

Taking it to the bank

More than one-third of the 20 biggest S&P gainers in the first half came from the financial sector - the segment of the market that suffered the worst beating during the credit crisis and market plunge, but that has been among the leaders in the recovery. These strong gains illustrate how investors have continued to scale back their worst fears of bankruptcies and failures in the sector as the economy and credit markets have found their footing, despite the nagging default risks that still threaten the sovereign-debt market.

The list also contains several technology stocks - considered a major sector for growth potential in the U.S. market - and a handful of consumer-staples stocks, which may have benefited from defensive buying, as uncertain investors seek out safer havens and look for pockets where the struggling U.S. consumer may be more likely to continue spending.

Much like the biggest gainers in the Canadian market, the S&P 500's mid-year leaders do come with a caution sign: They've become expensive. Excluding stocks with no calculable price-to-earnings ratio because they have negative earnings (most of those are the financial names on the leaders' list), the average P/E among these top gainers is 38 - more than double the index median of 15.

On Friday, we conclude our mid-year recap with a look at the worst-performing stocks on the S&P 500.