The Bull Market's Best- and Worst-Performing Stocks

Biblical references rarely seem appropriate in the secular world of Wall Street, but two years after the end of the apocalyptic 2007-09 bear market, the term "the last shall be first" resonates.

A host of financial-services companies top the list of the best-performing stocks over the two-year bull-market run that has pulled U.S. stocks -- as represented by Standard & Poor’s 500-stock index -- up a heavenly 93.7% (the figure is from the market’s bottom on March 9, 2009, through March 7, 2011, and excludes dividends; including dividends, the S&P 500 returned 102%). But many of these same companies fell so fast and so furiously in the market rout that they’ve yet to recover the losses they sustained since the market’s previous high, hit on October 9, 2007.

And such is the formula of the typical bull market, says Sam Stovall, chief investment strategist for Standard & Poor’s Equity Research. “In the first year, investments are made more on faith than fundamentals,” he says. Companies that survived the market’s worst-case scenarios take off first. Then come companies that are more closely tied to the health of the overall economy; they start to rise as investors gain confirmation that the fundamental business picture is improving.

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The bad news is that the third year of a bull market is the toughest, and that’s what’s starting now. “We are going to have a lot of headwinds,” Stovall says. “There are higher oil prices, inflation, interest rates -- you usually expect the defensive sectors take a leadership role” in that kind of environment. That said, Stovall expects share prices to keep rising, just not as quickly. In part, that’s because stocks usually perform well in the third year of a presidential cycle.

A look at the S&P 500 companies that have done best and worst over the past two years seems to follow Stovall’s script to the letter.

The top-performing company, Genworth Financial (symbol GNW), had seen its price drop into penny-stock territory, with shares selling for just 91 cents on March 9, 2009. Since then, stockholders have enjoyed a 1,300% rise, with the shares closing at $12.75 (all current prices are through March 7; gains and losses for stocks exclude dividends). But don’t expect long-time holders to be breaking out the champagne -- the insurance company’s shares still go for 60% less than what they fetched on October 9, 2007.

That’s pretty typical of a host of financial-services companies at the top of the bull-market gainer’s list. Fifth Third Bancorp (FITB) is up 904% since March 2009, but down 60% from 2007; Hartford Financial Services is up 605% over two years, but down 70% if you look at the longer-term period; XL Capital, a Bermuda-based financial-services firm, is up nearly 600% since the bull market started, but down 73% from its price before the bear came along. CB Richard Ellis Group (CBG), also considered a financial-services stock for its role in leasing and brokering commercial real estate transactions, is up 807% from two years ago, but down 9% from 2007.

But a handful of companies have done exceedingly well, no matter what time frame you consider.

JDS Uniphase (JDSU) was the bull market’s second-biggest gainer, posting a 1,037% gain. The telecommunications-equipment company is also up nearly 60% from the October 2007 high.

In the same enviable position are Ford Motor (F), which ranks sixth on the top gainer’s list, with a 743% gain over two years and a 76% gain since 2007; Pioneer Natural Resources (PXD), which is ranked eighth, with a 720% gain over two years and a 113% gain since 2007; and Tenet Healthcare (THC), ranked tenth, with a 681% two-year gain and up 104% from the market high.

But despite the strength of this bull market, some companies remain depressed. Supervalu (SVU), the operator of Albertsons and other supermarket chains, sells for 41% less today than it did at the beginning of the bull market -- and 77% less than it did in 2007. Worse, things aren’t looking up. Target’s foray into the grocery business makes it less likely that the hapless retailer will shake off its sales and earnings slump anytime soon.

And Supervalu’s outlook is a picnic compared with the prospects of Dean Foods (DF). It whined in its latest Form 10-K about the competitive nature of the dairy industry, which leads to low profits and slow growth. Worse, consumers are drinking less milk, the company says. “We expect this trend to continue in the near term,” the 10-K says. Dean is down 47% over the past two years, and 62% since October 2007.

Apollo Group (APOL), one of the nation’s largest for-profit education companies, is down 33% over the two-year stretch. Again, its outlook is uncertain. The sector has been slammed by government investigations and is now awaiting new rules that could restrict the ability of students to obtain the federal student loans and grants that are the lifeblood of for-profit schools. In addition, Apollo has been fighting a shareholder suit that claimed the company withheld information about a government investigation that accused Apollo of illegally recruiting students. The shareholders won the suit, and the Supreme Court rejected Apollo’s appeal. The school revamped its recruiting program long ago, but the suit could cost the company as much as $300 million in the near term.

Other noteworthy companies still losing after all these years: PulteGroup (PHM), a big homebuilder that continues to struggle with weak demand for housing, and H&R Block (HRB), the ubiquitous but struggling tax-preparation firm.

Still, losers are definitely in the minority over the past two years. Only 14 of the 500 S&P companies saw share prices slide over the period, while some 290 issues had doubled in price as of March 4, says S&P analyst Howard Silverblatt.

Both Stovall and Silverblatt believe there’s more charge left in this bull, too. The reason? Earnings are rising and valuations still seem reasonable. “Earnings are high, price-earnings ratios are good, and cash flow is good -- so these good numbers are not make-believe,” says Silverblatt.

The one caveat is that rising oil prices could boost inflation, slow economic growth and take a bite out of corporate profits. But for that scenario to upset stock prices, Stovall thinks inflation needs to soar to an annual rate of 4% (U.S. consumer prices have climbed 1.6% over the past year).

For now, Stovall is projecting another 5% to 7% increase in stock prices over the remainder of the year. Plus, he says history tells us that the election cycle is bullish. Since World War II, Stovall says, “the S&P 500 has never declined in the third year of a president’s term.”