When 2008 ended with a -37.0% loss in the S&P 500, investors
didn't have a lot of good news to share.
But 2009, happily, proved to be a comeback year, with the benchmark
index gaining +23.5% and many stocks gaining much more than that.
The highlights of the year that closed the millennium's first
decade are a guy named Madoff, the $787 billion stimulus package
and a rebound off the worst lows many of us are likely to see in a
Amid the tumult, these ten companies inked remarkable gains. Here's
a look at what they did right, what's next, and if these companies
belong in your portfolio in the New Year:
Tenet Health Care (
- 2009 Performance +368.7% (2008: -77.4%)
What Went Right: Hospital operator Tenet managed a decent
turnaround with two strong quarters, which was good enough news to
allow its shares to pick up some lost ground after the company was
caught in the credit crunch. Tenet began to pick up ground with the
rest of the sector as the health-care bill took shape. Hospitals,
for their part, eat a tremendous amount of losses when uninsured
patients stiff them for treatment, and any steps to bolster
Americans' health coverage is likely to add directly to their
What's Next: The health care bill has passed the House and the
Senate and the differences still need to be ironed out.
Verdict: Tenet made it through a rough patch and deserves some
applause for its performance, but its shares are fairly valued.
Investors who buy these shares now are likely to be disappointed.
Apple (Nasdaq: AAPL)
- 2009 Performance: +126.0% (2008: -56.9%)
What Went Right: Everything. The year started with concerns about
CEO Steve Jobs' health. He took a medical leave and announced after
the fact that he'd had a successful liver transplant. His absence
didn't seem to hurt anything: Mac sales totaled $13.8 billion in
the fiscal year ended Oct. 31, with iPod sales totaling $8.1
billion and the iPhone bringing in $6.8 billion. Apple sold $4.0
billion worth of music and $2.4 billion worth of software -- or, as
they are called these days, "apps."
What's Next: The tech community expects a new product. Apple has
secured an event space in Australia suitable for a product launch
and has bought the domain name iSlate.com. Amid rampant rumors, the
notoriously secretive company isn't saying a word. Shares are near
an all-time high.
Verdict: Apple is expected to earn $7.91 a share in its 2010 fiscal
year, though analysts always underestimate. At its current level of
valuation, shares likely have somewhere in the neighborhood of +25%
upside, though a new product would render those forecasts moot. All
in all, Apple is likely to continue to grow its user base with its
elegant must-have gadgets and continue to command a heady
valuation. It's a buy.
Ford Motor Co. (
- 2009 Performance: +335.4% (2008: -66.0%)
What Went Right: In Ford's case, the question isn't so much what
went right as it is what didn't go wrong. As General Motors and
Chrysler failed and even Toyota foundered, Ford hung in. It had
already begun to focus on its core business, offloading the
nonessential brands like Aston-Martin, Volvo, Jaguar and Land Rover
that it bought during the Jacques Nasser era.
Ford posted some losses but it didn't take a dime from the feds and
was never anywhere near bankruptcy court. Shareholders who bought
while investors ran for the exits did extremely well: It was
possible to earn a +500% return with these shares in 2009.
What's Next: Ford's highly excellent CEO Alan Mullaly is presiding
over an automaker that's building cars people can afford and want
to drive. It's also on track to deliver cutting-edge lithium-in
battery technology to help electric cars transition into the
mainstream. Any market share that it's picked up could be short
lived: GM is coming back stronger than ever, and Toyota, though
weaker than in years past, remains a tough competitor with a very
loyal customer base.
Verdict: Ford was profitable overall for the first three quarters
of 2009 and is expected to earn less than $0.60 per share in 2010.
Given its historical valuation, whatever rosy future is in store is
already priced in, as shares jumped above $10 for the first time
since 2005. Investors should look elsewhere.
Freeport McMoRan Copper & Gold (
- 2009 Performance: +231.3% (2008: -76.1%)
What Went Right: The prospect of absolute financial annihilation is
always good news for hard assets like gold, the price of which
started the year under $900, dipped to about $875 in April and has
climbed steadily since, closing the year and the decade at $1096,
up 23% for the year. That's great news for major gold producers
like Freeport, which also saw the value of copper surge.
What's Next: The market inked some nice gains this year, and
investors who were burned in 2008 will likely be ready to inch back
into the market and away from safe havens like gold. That will
depress prices and mean tighter margins for companies like FCX.
Verdict: Gold is a cautious investment, and caution is falling out
of vogue. Investors likely will be safer in cash than in the yellow
metal over the course of 2010.
Whole Foods (Nasdaq: WFMI)
- 2009 Performance: +192.1% (2008: -76.9%)
What Went Right: Consumers came back from 2008's spending lockdown,
which was brought on by high gas prices in late 2007 and
exacerbated by falling home prices and the market collapse in 2008.
But the upscale grocer's loyal customers decided that they couldn't
live without its organic produce and other high-quality foods,
especially if they were eating in more. The company received $400
million in private equity funding that allowed it to continue its
expansion during the downturn, and it also shed of some antitrust
issues that lingered after its acquisition of Wild Oats market.
What's Next: Whole Foods was one of my picks going into 2009. I
called it a buy at about ten bucks and was pleased to see the
shares rebound. At 32.5 times earnings, however, these shares have
almost the same valuation as Apple without the future upside.
Verdict: If you like Whole Foods, shop there. I do. But look
elsewhere for investments. There's no upside here.
Amazon (Nasdaq: AMZN)
- 2009 Performance +162.3% (2008: -44.6%)
What Went Right: Amazon had a great Christmas, not in 2009 but in
2008, which was some trick in one of the worst shopping seasons in
recent memory. This year, the site was getting hundreds of orders
per second, and the company will continue to capitalize on its
leading position as the nation's online mall. Its Kindle reader has
started a revolution that, for now, the company owns. The shares
rose all year.
What's Next: Amazon is going to release numbers that Wall Street
likes, but then it's likely that some of the fizz will fade as
investors question whether the shares are worth nearly 80 times
Verdict: I like Amazon, but given its current valuation, it's
nowhere near my radar screen by any stretch of the imagination.
Still, patient investors should keep some cash at the ready to take
advantage of the inevitable pullback.
American Express (
- 2009 Performance +118.4% (2008: -64.3%)
What Went Right: American Express fired cardholders in 2009 that
had no business leaving home without it. The cardmaker had lowered
its standards somewhat to grow its membership base, and when the
economy tightened and cardholders felt the economic squeeze, many
of them fell behind on their AmEx bill. The company has since
worked to focus on its best customers and rebuild itself as a
premium brand. The worst thing that happened to the company this
year might be its association with Tiger Woods, and that's hardly
keeping the CEO up at night.
What's Next: AmEx will keep its standards high and continue to
bring in the best customers. And if a new pitchman signs on, no one
should be too surprised.
Verdict: At 33.5 times earnings, AXP is probably a little
overvalued. It's a good comeback story for an American icon, but
there is a lot more upside out there than these shares.
Goldman Sachs (
- 2009 Performance +100.1% (2008: -60.8%)
What Went Right: The storied investment bank sold preferred shares
to billionaire investor Warren Buffett's Berkshire Hathaway and was
among the first to get shed of government oversight by paying back
its TARP funds. Goldman made a fortune trading this year and in
underwriting stock issues and has so far reported three exceptional
quarters for 2009 totaling $7.4 billion in profits.
What's Next: Goldman never stops trading, underwriting or financing
deals, and it's likely to see a continued rebound in 2010 as a rich
Verdict: Goldman is on track to earn $18.75 per share in 2010,
which implies a lot of upside for these shares. One potential
catalyst is a share split, which doesn't change any of the
underlying fundamentals but can make the shares -- which trade for
$169 -- "seem" more affordable. These shares are a solid choice for
Google (Nasdaq: GOOG)
- 2009 Performance +101.5% (2008: -55.1%)
What Went Right: Google continued to show that it's one of the
smartest companies out there, notably in February when it posted
its first message on Twitter -- in binary code. The company
released Google Voice in March, an application that has the
possibility to completely change the way people use their phone,
which may be one reason that it's not available on the iPhone,
which runs exclusively on AT&T's network. The company continued
to benefit from advertisers who like targeting consumers and being
able to measure results.
What's Next: The catchword here is innovation. That's why investors
are willing to pay 40 times earnings -- not because of what Google
has done, which is game-changing, but because of what it will do
Verdict: Every growth-oriented portfolio should hold these exciting
Diamond Offshore (
- 2009 Performance +67.0% (2008: -58.5%)
What Went Right: The market was wrong about oil. Admittedly, it
looked a little bleak going into the year. No one thought the
economy was going to do anything but contract, which meant weaker
demand for crude. Prices opened the year in the $40s and stayed
there through the first quarter before beginning to rebound in
about May. They closed the year just shy of $80 a barrel. That's
great news for companies like Diamond Offshore, which explore for
petroleum in deep-sea wells, which brought the industry some big
finds in 2009, news that clearly points to the sea as a bright spot
in the industry's future.
What's Next: A continuing rebound means higher and higher prices
for crude, and you don't have to look very far to find an economist
who's forecasting triple-digit prices in the near-term future. The
higher crude's price, the more cost-effective expensive offshore
drilling becomes. That's not great news at the pump, but it's
outstanding news for drillers like Diamond Offshore.
Verdict: DO had a great year, but it's still trading for less than
ten times earnings. It's a suitable investment for risk-tolerant
investors willing to bet that oil will continue to hold its recent
gains or continue its uptrend.
Editor, Government-Driven Investing
P.S. It's a little ironic. When my boss Paul
Tracy released his investment predictions for 2009 last
year, his critics blasted him for his "absurdity."
But his "wildest" predictions -- the ones claimed to be the
most "out there" and "impossible to forecast" -- ended up
making his readers the most money (up to +332.4%!). To
see how ALL of last year's predictions fared compared to the
overall market -- and to get a sneak preview of his 11
brand new forecasts for 2010, simply click here.
P.P.S. One of these new 2010 picks could earn you
+1,300% in a surprise takeover. Click here for more info.
Disclosure: Andy Obermueller does not own shares of any security
mentioned in this article.