S&P 500’s eight biggest surprises
Electronic Arts, Cablevision and O’Reilly lead a pack of top performers
Analysts thought these stocks would be dogs. Boy, were they wrong.
Investors usually don’t like big surprises — unless they make them richer. So unwrapping these stock market gifts has been a joy.
There are eight stocks in the Standard & Poor’s 500 index, including cable operator Cablevision, video-game maker Electronic Arts and auto-parts seller O’Reilly Automotive, that have been unexpected treats for investors this year, according to a USA TODAY analysis of data from S&P Capital IQ. These stocks are among the best 30 stocks in the S&P 500 this year, even though analysts at the start of the year on average thought they’d be dogs.
It’s been a disappointment of a year for most investors, with the S&P 500 falling 0.8%, a far cry from its roughly 10% average annual longterm return. Even if you add the market’s 2% dividend yield, a 1.2% return is only a sliver of what the market has generated over the long term.
But when there’s disappointment all around, positive surprises are all the more pleasing.
Take Cablevision, one of the largest cable operators in the country. The stock started the year at $20.64 a share and with an average rating of “hold” from Wall Street. Analysts thought the stock would be worth 7.6% less in 18 months. But there’s nothing a $34.90-a-share buyout can’t solve. Shares soared 52% after Cablevision agreed to be bought by the Netherlands’ Altice.
Rewind to the beginning of 2015. Video-game consoles were supposed to be dead, because we’d all be playing on our smartphones. Electronic Arts, one of the biggest makers of games for consoles, was expected to see its stock worth 4.2% less in 18 months. But while Wall Street was bearish on EA, no one told the gamers. EA’s revenue over the past 12 months is up 21% from fiscal 2014 ended in March. Net income has skyrocketed from $8 million in fiscal 2014 to $839 million. And the stock is up 51% this year.
Car parts seller O’Reilly Automotive also has run over its doubters. Shares of the stock are up 32% this year — a remarkable showing considering analysts thought it would be 2.7% lower over the following 18 months.
Revenue and profit growth have been strong at O’Reilly as consumers keep cars running longer. Revenue over the past 12 months is up 8% from 2014 and net income is up 15%.
Its seems that some investors don’t have to wait until next week to open their gifts. The cash is already in their accounts.
When there’s disappointment all around, positive surprises are all the more pleasing — especially when investors were expecting lumps of coal.