10 Top Value Stocks With Gains Up to 48% in 2012
Stocks in the S&P 500 Value Index have gained almost 23% this year, while the S&P 500 Growth Index has lost a startling 6% this year. The primary benchmark index, the S&P 500 , is up 7.5% this year.
Over the past year, value stocks -- which are seen as inexpensive based on fundamental measures such as cash flow or price-to-earnings ratios -- and growth stocks -- which have above-average revenue or profit growth -- had moved in tandem, putting in a losing performance in the low single digits. Investors eschewed all kinds of risks.
But this year, the financial sector, which now has most of its members in the S&P 500 Value Index, is pulling up the whole value category. Financials, which have been soundly thumped over the past three years, hence their relative cheapness, are up 11.1% this year, including 10% in the past 13 weeks. That's second only to the information-technology sector's 12% advance in 2012.
Value investors believe that bank and investment house fundamentals indicate they are undervalued and poised to rebound in anticipation of Europe successfully resolving its sovereign credit woes and because the U.S. will post faster economic growth this year, although not at the rapid pace that favors growth stocks and makes their higher price-to-earnings multiples worth the price.
Here are 10 of the top performers in the S&P 500 Value Index this year in inverse order of share-price performance:
10. Applied Materials (AMAT)
Company profile: Applied Materials is the world's largest supplier of semiconductor-manufacturing equipment to the highly cyclical semiconductor industry. Late last year it bought Varian Semiconductor Equipment for $4.6 billion in cash, giving it an immediate market-leading presence in the field of ion implantation.
Investor takeaway: Its shares are up 21% this year, including 12% in the past month, but on a 12-month basis, they're down 17%.
Company profile: Dell is a manufacturer and direct seller of notebook computers, desktop computers, software and other peripheral equipment. It's also building a retail store presence.
Investor takeaway: Its shares are up 21% this year and have a three-year annualized return of 25%. S&P gives Dell a "strong buy" recommendation with five stars, its highest rating, and a $19 price target, a 7% premium to its current price.
8. EMC Corp. (EMC)
Company profile: EMC is a leading provider of hardware, software, and services for enterprise network storage, and now, through its VMware unit, software and services. The company is well-positioned to become a major player in cloud computing and virtualization software.
Investor takeaway: EMC's shares are up 22% this year and have a three-year annualized return of 30%. S&P lowered its rating on its shares to "buy" from "strong buy," on Jan. 26, based on valuation as the share price is approaching the firm's price target of $28. S&P's survey of analysts found 21 "buy" ratings, 13 "buy/holds," and four "holds."