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The Big Question: Can the S&P 500 Index Stay Above 1300?

Posted
1/30/2012 9:06:00 PM
By: Kapitall
Referenced Stocks:ESRX;JCP;KIM;LM;MPC;RHT;VMC;WMB;WDC;WFM

The Standard & Poor’s 500 index is still hovering around the obsessive 1300 benchmark. On Friday it traded between 1312 and 1318, but it makes investors nervous.

Historically, the index hasn’t been able to trade above 1300 for a long period of time, nor has it been able to grow much father beyond it. Many would love to see the economy boom and leave 1300 in the dust, but USA Today aptly describes the number as a magnet that has pulled stocks back to its level.

1300 was first reached 13 year ago on March 15, 1999, and has since been above the 1300 level as recently as last July, but it has struggled to stay above since.

If you’re suspicious you may be among an increasing number of analysts who think the current levels are unsustainable, and bound to be brought back down.

Belly of the Beast

USA Today’s Matt Krantz has been paying attention to this phenomenon, but unlike most bears he seems like he feels the tides could change.

Consider, he writes, that since March 15, 1999 (when the index first hit 1300) many of the stocks have become more valuable.  “Of the 407 stocks in the current S&P 500 that were trading in 1999, 296, or 73%, are higher, say data from S&P Capital IQ. Some, including Celgene, Apple and Cognizant Technology, are up more than 4,000%.”

Since that day 192 stocks have at least doubled in value, “posting a 5.5% average annual gain, which is healthy given how low interest rates are.”

Lastly, since March 15, 1999 the sectors energy, materials and consumer staples have gained 187%, 78% and 40%, respectively. “While the markets are not a lot higher, the underlying companies are much stronger,” he says.

So, do you think this strength will carry the index above 1300 this time?

Business Section: Investing Ideas

If you want to keep an eye on the sustainability of the current rally, it will help to pay close attention to the performance of the current market leaders.

With that in mind, we started with a list of the top 100 performing S&P 500 stocks, and collected data on institutional money flows. All of the market leaders mentioned below have seen significant institutional buying during the current quarter.

If big money managers add to their positions in these stocks, it could signal more upside momentum. If, on the other hand, these stocks start falling, we may be witnessing profit-taking and a subsequent reversal of the current bullishness on Wall Street.

Use this list of S&P 500 stocks as a starting point for your own analysis. List sorted by performance over the last month.

 

 

1. Express Scripts Inc. (ESRXEarningsAnalystsFinancials): Provides a range of pharmacy benefit management (PBM) services in North America. The stock has gained 15.71% over the last month. Net institutional purchases in the current quarter at 43.9M shares, which represents about 9.09% of the company’s float of 482.82M shares.

 

2. Western Digital Corp. (WDCEarningsAnalystsFinancials): Engages in the design, development, manufacture, and sale of hard drives worldwide. The stock has gained 15.15% over the last month. Net institutional purchases in the current quarter at 10.0M shares, which represents about 4.3% of the company’s float of 232.50M shares.

 

3. J. C. Penney Company, Inc. (JCPEarningsAnalystsFinancials): Operates department stores in the United States and Puerto Rico. The stock has gained 14.83% over the last month. Net institutional purchases in the current quarter at 5.7M shares, which represents about 3.95% of the company’s float of 144.45M shares.

 

4. Red Hat, Inc. (RHTEarningsAnalystsFinancials): Provides open source software solutions to enterprises worldwide. The stock has gained 13.97% over the last month. Net institutional purchases in the current quarter at 9.7M shares, which represents about 5.05% of the company’s float of 191.95M shares.

 

5. Kimco Realty Corporation (KIMEarningsAnalystsFinancials): A publicly owned real estate investment trust. The firm engages in acquisitions, development, and management of neighborhood and community shopping centers. The stock has gained 11.97% over the last month. Net institutional purchases in the current quarter at 25.4M shares, which represents about 6.47% of the company’s float of 392.33M shares.

 

6. Marathon Petroleum Corporation (MPCEarningsAnalystsFinancials): Engages in refining, transporting, and marketing petroleum products primarily in the United States and internationally. The stock has gained 11.87% over the last month. Net institutional purchases in the current quarter at 258.7M shares, which represents about 76.78% of the company’s float of 336.92M shares.

 

7. Legg Mason Inc. (LMEarningsAnalystsFinancials): Operates as an asset management company worldwide. The stock has gained 11.74% over the last month. Net institutional purchases in the current quarter at 5.6M shares, which represents about 4.96% of the company’s float of 112.92M shares.

 

8. Whole Foods Market, Inc. (WFMEarningsAnalystsFinancials): Engages in the ownership and operation of natural and organic food supermarkets. The stock has gained 9.59% over the last month. Net institutional purchases in the current quarter at 7.6M shares, which represents about 4.63% of the company’s float of 163.98M shares.

 

9. Vulcan Materials Company (VMCEarningsAnalystsFinancials): Engages in the production and sale of construction aggregates for the infrastructure industry primarily in the United States. The stock has gained 9.30% over the last month. Net institutional purchases in the current quarter at 6.4M shares, which represents about 4.98% of the company’s float of 128.64M shares.

 

10. Williams Companies, Inc. (WMBEarningsAnalystsFinancials): Engages in finding, producing, gathering, processing, and transporting natural gas primarily in the United States. The stock has gained 8.37% over the last month. Net institutional purchases in the current quarter at 35.0M shares, which represents about 5.96% of the company’s float of 587.29M shares.

 

 

(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Institutional data sourced from Fidelity.)

 

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