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| Playing oil stocks
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Earnings could fall dramatically if rising prices lead to reduced demand -- here's a way to cope. (Full story)
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| Prices, where to from here?
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NEW YORK (CNNMoney.com) -
Here's an example of oil's power as a market mover: To find the best performing S&P 500 stocks for 2005, we had to dig deep just to find 10 that aren't somehow tied to energy.
Of the remaining 10 that managed to turn a profit without drilling, extracting, pumping or refining something, half of them are in the healthcare field, if you don't count health insurance premiums as a form of extraction.
While the Dow is little changed for the year and the over all S&P 500 index has posted a modest 4 percent gain so far, here's a look at returns investors could have gotten if they bet on energy, healthcare, and select retail and tech stocks in 2005.
Earnings projections are from First Call. Percent changes in stock prices are through Monday.
Express Scripts (ESRX (Research)): Up 130 percent – The pharmacy benefits company is the golden performer of the S&P 500 as everyone from HMOs to union health insurance plans turned to prescription drug middlemen to negotiate with drug companies in a bid to cut soaring health care costs.
The company has especially benefited from the growing availability of generic drugs and the popularity of home delivery service. It recently raised its 2006 earnings forecast well above the 23 percent increase projected by Wall Street analysts.
Energy Companies: Valero Energy (VLO (Research)) technically occupies the number two spot on this year's list, with its stock up 128 percent.
But five other energy companies were also in the top 10: EOG Resources (EOG (Research)), up 116 percent. Burlington Resources (BR (Research)), up 99 percent, Sunoco (SUN (Research)), up 92 percent, National Oilwell Varco (NOV (Research)), up 76 percent and XTO Energy (XTO (Research)), up 72 percent.
The reason is clear enough: The price of crude has soared since the start of the year.
And with many analyst believing that most of the world's easily accessible oil has been found, some companies have said they plan on returning profits back to shareholders as opposed to investing in research and development. Some of the biggest oil producers have boosted their dividends several times this year.
Apple Computer (AAPL (Research)): Up 121 percent. In 2004 Apple was first on the list and this year's surge can be attributed to the same phenomenon: The iPod. The digital music player is the most popular MP3 device on the market.
And Apple's iTunes site accounts for the lion's share of the growth in music downloading, which is making solid gains despite an overall decline in music sales. The popularity of these two products is helping woo customers to the company's traditional consumer product: Its Mac line of personal computers.
Apple's strong showing isn't expected to stop. Analysts are looking for a 47% jump in profits when the company reports fourth-quarter results in January 2006.
Corning (GLW (Research)): Up 70 percent. The company has ridden trends for nearly a century, helping Thomas Edison build the first light bulb, cashing in on the ceramic cooking wear craze and, and in the 1990s, helping build the world's network of fiber optic cables.
The new millennium seems no different for the Corning, N.Y.-based company. Its stock has recovered nicely since the dot.com bubble burst, mainly from sales glass for flat screen monitors and TVs, the latest must-have items to replace cumbersome tube-type TVs and monitors.
How long the company can ride this latest trend is unclear. Analysts are predicting an 89 percent increase in earnings for 2005 but only a 20 percent increase for 2006. (For a closer look at Corning, click here).
Office Depot (ODP (Research)): Up 69 percent. Investors in the struggling retailer cheered the appointment of Steve Odland as chief executive earlier this year.
Odland was brought over from AutoZone, where he slashed costs, restructured and tripled the share price during his time there. It's a strategy he's continuing at Office Depot, and it appears to be working. After meeting or only slightly beating earnings estimates in 2004, the company trounced them in the first and third quarters of 2005.
McKesson (MCK (Research)): Up 63 percent. Like Express scripts, the prescription drug distributor has also benefited from the growing availability of generic medicines, which generate higher profit margins. McKesson has beat analysts estimates for the last five quarters, nearly doubling its profit in the second quarter of 2005.
Nordstrom (JWN (Research)): Up 59 percent. One bright spot in retail stocks in 2005: upscale merchants like Nordstrom. The company has beat earnings estimates for the last four quarters and analysts expect a 38 percent rise in profits in 2006, though several high-end retailers have been having a tough holiday sales season so far.
Coventry Health (CVH (Research)): Up 59 percent. The managed care provider has seen solid earnings growth this year as companies and governments scramble to save on healthcare costs. Analysts are predicting earnings growth of 26 percent in 2005 and 15 percent in 2006. The company also got a boost from being inducted into the S&P 500 this year.
Humana (HUM (Research)): Up 57 percent. In addition to benefiting from the overall rise in health insurances premiums, the health benefits company is among many competing for $400 billion in prescription Medicare money that will be doled out over the next 10 years.
The company also announced a deal with Wal-Mart, the nation's largest retailer, to offer prescription drugs to Medicare recipients. Analysts are looking for 2005 earnings to jump 25 percent and post an even higher 30 percent gain in 2006.
Nvidia (NVDA): Up 54 percent. The graphics chip maker has posted high profit margins and substantial revenue growth over the last several quarters. The company has consistently beaten earnings estimates for the last four quarters and analysts expect a 191 percent jump in earning per share in 2006.
And the laggards
Dana (DCN (Research)): Down 60 percent
Gateway (GTW (Research)): Down 56 percent
Sanmina-SCI Corp. (SANM (Research)): Down 50 percent
General Motors (GM (Research)): Down 48 percent
LexMark International (LXK (Research)): Down 45 percent
Ford Motor (F (Research)): Down 44 percent
Unisys (UIS (Research)): Down 41 percent
Avaya (AV (Research)): Down 39 percent
Navistar International (NAV (Research)): Down 38 percent
Applied Micro Circuits (AMCC (Research)): Down 38 percent
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