By Philip van Doorn, MarketWatch
Stock market indices have risen so far this year, with the past two strong trading sessions making up for the previous two days of pain.
With economic and political uncertainty tied to the decline of the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0183% , the big unknown of just how low the price of oil might fall and the 5% third-quarter U.S. GDP growth rate, the dollar is playing its customary role as a safe haven for investors. That has caused the yield on 10-year U.S. Treasury note to decline to 2.03% Thursday from 2.17% at the end of 2014. The yield on the 10-year dropped 87 basis points last year.
So it’s not much of a surprise that among stocks included in the S&P 1500 Composite Index, the weakest performers have been in the Oil and Gas Drilling subsector, which is down 8% so far in 2015, while the strongest subsector has been Real Estate Investment Trusts, which tend to feature high dividend yields and are therefore especially sensitive to rising interest rates.
There’s plenty of expectations for the Federal Reserve to begin raising the short-term federal funds rate this year, since the benchmark rate has been locked in a range of zero to 0.25% since late 2008. But even when the Fed finally makes that move, market forces may hold down long-term interest rates for an extended period.
Looking more closely at the S&P 1500, the 10 stocks with the biggest gains so far this year are a diverse group, although four are in the Health Care sector and none of the high-flying REITs made the list:
|Company||Ticker||Industry||Total return - YTD||Total return - 3 years||Total return - 5 years|
|Repligen Corp.||/zigman2/quotes/210324360/lastsale RGEN||Biotechnology||24%||611%||547%|
|J.C. Penney Co.||/zigman2/quotes/204684963/lastsale JCP||Department Stores||23%||-77%||-68%|
|Aeropostale Inc.||Apparel/ Footwear Retail||21%||-83%||-87%|
|Ebix Inc.||/zigman2/quotes/208723424/lastsale EBIX||Insurance Brokers/ Services||20%||-5%||22%|
|Akorn Inc.||/zigman2/quotes/208960448/lastsale AKRX||Medical Distributors||11%||269%||2,341%|
|Merck & Co.||/zigman2/quotes/209956077/lastsale MRK||Major Pharmaceuticals||11%||92%||103%|
|Papa John’s International Inc.||/zigman2/quotes/207343722/lastsale PZZA||Restaurants||10%||229%||425%|
|Dick’s Sporting Goods Inc.||/zigman2/quotes/200566298/lastsale DKS||Specialty Stores||10%||70%||132%|
|Boston Scientific Corp.||/zigman2/quotes/203726728/lastsale BSX||Medical Specialties||10%||175%||62%|
|Total returns assume reinvested dividends. Data source: FactSet|
In comparison, the S&P 1500 Index has returned 72% over the past three years and its five-year total return is 101%.
Shares of Repligen Corp. are up 24% this year, having popped 23% on Thursday, after the company said it had received a $1 million milestone payment from Pfizer Inc. /zigman2/quotes/202877789/lastsale PFE +2.28% for the development of compounds that could potentially be used to treat spinal muscular atrophy and that it was eligible to receive up to $63 million in additional payments under its agreement. The company also said its revenue for 2014 would range from $63 million to $63.5 million, and projected 2015 revenue would range from $69 million to $72 million.
The second- and third-best-performing S&P 1500 stocks are retailers, which have done terribly over the past three years. Because they’re heavily shorted, they’ve been set up for short squeezes on any good news, as short-sellers buy shares to cover their positions, thus pushing up the stock prices.
J.C. Penney Co. ranks second, with a year-to-date total return of 23%, springing from the company’s preliminary announcement late on Tuesday that its comparable-store sales for the nine-week November and December period were up 3.7% from a year earlier. That good news sent the shares up 20% on Wednesday. The stock rose another 1% on Thursday, as investors failed to show any concern over J.C. Penney’s decision to close 40 stores and cut 2,250 jobs.
Ranking third is Aeropostale Inc. , with a 21% year-to-date gain. The stock was up 24% Thursday when the teen retailer raised its fourth-quarter outlook and said its margins were higher than expected, although its comparable sales were down 9% for the nine-week period ended Jan. 3.