Let’s go ahead and call it an annus mirabilis for corporate America. Despite modest overall sales growth, it’s been a banner year for U.S. businesses and their shareholders. Profits at S&P 500 companies reached record levels and just kept going. “Earnings set an all-time high in the first quarter, then the second quarter beat that, and then the third beat the second,” Howard Silverblatt, the senior index analyst for S&P Dow Jones Indices, wrote in an e-mail on Friday. “Fourth quarter is expected to set another record.”
Boosted by those earnings trends as well as by rising optimism about the economy and the outlook for interest rates, stocks have soared to their best annual gains since 1997. With two trading days left in the year, the S&P 500 is nearly 30 percent higher. Smaller stocks, as a group, have done even better, propelling the Russell 2000 index to a gain of almost 37 percent on the year.
The rising market tide has lifted an astounding percentage of boats: 457 of the S&P 500 stocks, or more than 90 percent, have posted gains in 2013, according to Silverblatt, and more than two-thirds have gained 20 percent or more. Even as winners so vastly outnumbered losers, some companies clearly stood out as exceptional successes. These 11 companies have been hotter than Sriracha this year.
Toys for Techies (and Others): Tesla Motors (NASDAQ: TSLA)
Tesla’s Model S was on fire this year – sometimes literally. The luxury car garnered rave reviews and proved that a market exists for a $70,000 electric sedan if it’s built and marketed right. Tesla reported its first-ever quarterly profit this year and the Model S was the top-selling car in eight of America’s 25 most expensive zip codes (all eight are in California), according to Edmunds.com. The Model S also kept its five-star safety rating from the National Highway Traffic Safety Administration after three highly publicized battery fires.
Tesla CEO Elon Musk’s vision and marketing prowess have prompted comparisons to the late Steve Jobs. The U.S. Energy Information Administration predicted this month that just 1 percent of cars and light trucks in the U.S. in 2040 will be fully electric, like the Tesla, and another 1 percent will be plug-in hybrids. Just five percent will be hybrid electric vehicles like the Toyota Prius. Musk showed this year that, if anyone can change that forecast, he may be the one.
“Tesla is on track to become the first successful new automobile manufacturer in the U.S. in 50 years – and in the process galvanize global adoption of electric-powered transport,” Chris Anderson wrote in Fortune last month as the magazine named Musk its Businessperson of the Year. Oh, and even though the stock is well off its highs for the year, shares are still up nearly 350 percent. Now that’s what we call electric.
Honorable Mention: Amazon (NSADAQ: AMZN)
The stock, just under $400, is near an all-time high despite earnings that continue to languish as Jeff Bezos invests in his plans for ultimate domination. The continuing shift to online and mobile shopping helped the web retailing giant boost Cyber Monday sales by 39 percent. Shipping delays through UPS may help make much-ballyhooed plans for delivery by drone even more appealing.
Media Mass: Netflix (Nasdaq: NFLX)
“Content is the new black,” The New York Times declared in October in detailing Netflix’s latest milestone: 40 million members, up from less than 30 million a year earlier. Original programming hits like “House of Cards” and “Orange is the New Black” helped fuel that growth, driving the company’s U.S. subscriber base past HBO’s domestic total. Netflix plans on doubling its investment in such content next year, while still spending vastly more on other programs and movies.
“We don’t and can’t compete on breadth of entertainment with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google,” the company explained in its most recent long-term outlook. “For us to be hugely successful we have to be a focused passion brand. Starbucks, not 7-Eleven. Southwest, not United. HBO, not Dish.”
Netflix stock has always stirred passion among investors, both positive and negative, but its gains this year – the stock soared almost 300 percent – make it a streaming success for 2013.
Honorable Mention: Yahoo (NASDAQ: YHOO)
CEO Marissa Mayer made plenty of headlines this year, from banning telecommuting at the company to buying Tumblr for $1.1 billion. The company also managed to draw more monthly U.S. visitors than Google for the first time since 2011, according to comScore. That served as a reminder that Yahoo is still huge and suggested that Mayer’s turnaround efforts may be gaining traction. Yahoo’s stock price more than doubled this year, but Mayer will still need to prove the company can be as big a power in mobile (which, along with Tumblr traffic, wasn’t counted in those comScore numbers), and that it can deliver earnings growth.
Retailing Rebound: Best Buy (NYSE: BBY)
The consumer electronics retailer still faces stiff competition from the likes of Amazon and Wal-Mart Stores, but it was the stock market’s hottest comeback story of 2013. The stock had plunged 49 percent in 2012 as Best Buy appeared to be headed for the same destiny as CDs and DVDs. CEO Hubert Joly managed to forestall that fate through aggressive cost-cutting and plans to combat “showrooming.” Investors bought into Best Buy’s turnaround to the tune of a 240 percent stock price gain in 2013. “Best Buy remains one of the more impressive retail turnaround stories in recent memory,” Morningstar analyst R.J. Hottovy wrote last month.
At the same time, though, the company warned that a heavily promotional holiday sales season could cut into its margins, meaning that it still may be some time before Joly can say his turnaround is a lasting one.
Honorable Mention: GameStop (NYSE: GME)
Mobile gaming may have momentum, but console gamers got a double dose of good news this year with the releases of Sony’s PlayStation 4 and Microsoft’s Xbox One. The birth of a new console cycle reinvigorated GameStop, as did the runaway success of Take Two Interactive’s Grand Theft Auto V. GameStop shares have pulled back from their November highs, but are still up 93 percent on the year.
Financial Powerhouse: Morgan Stanley (NYSE: MS)
James Gorman made a big strategic bet when he took over as Morgan Stanley’s CEO in 2010. The bank, he said, had been flying too close to the sun during the financial crisis and needed to get back to basics. Gorman started Morgan Stanley on a path that reduced its vulnerability to risky and volatile bond trading and placed more emphasis on safer lines of business like wealth management. (Gorman also very publicly pronounced that Wall Street employees were often paid too much.)
That move finally looks to be working. “Gorman's Strategy Pays Off for Morgan Stanley,” The Wall Street Journal declared in October after the bank posted a third-quarter profit of $888 million on revenues that topped those at rival Goldman Sachs. Morgan Stanley’s turnaround still has a way to go but its stock rocketed 62 percent higher this year, easily besting the gains of Goldman, JPMorgan Chase, Bank of America and Citigroup.
Honorable Mention: BlackRock (NYSE: BLK)
It may not be a household name like some other financial giants, but BlackRock has become a huge player in the asset-management business. How huge? The Economist provided an answer earlier this month: “Founded in 1988, it has $4.1 trillion in assets under management, making it bigger than any bank, insurance company, government fund or rival asset-management firm. It single-handedly manages almost as much money as all the world’s private-equity and hedge funds.” The U.S. Federal Reserve, by comparison, now has some $4 trillion in assets on its balance sheet.
BlackRock has grown dramatically in recent years, helped by the booming stock market and the increasing popularity of exchange-traded funds. Highly regarded CEO Laurence Fink told investors in October that he sees “no ceiling” to the company’s growth prospects. The stock climbed 53 percent this year.
There’s an App for That: Uber
While we wait for driverless cars to speed into the mainstream, this app-based car service became all the rage among the urban elite (and inspired some rage among them, too). Uber lets app users in 60-plus cities order a personal car and driver. The company, which launched in San Francisco in 2009, cruised to another level in 2013.
Leaked financial data showed the company was on pace to pull in $210 million in revenue this year. The company also received a $258 million investment from Google Ventures and TPG Capital. “Our vision is to build a technology company that changes transportation and logistics in urban centers around the world, and this financing gives us the fuel to make that a reality,” CEO Travis Kalanick wrote in a blog post about the financing in August. Uber also expects that a special financing partnership announced last month with Toyota and General Motors will attract more drivers to its service by making it cheaper for them to buy or lease cars.
Uber must still contend with competitors such as Lyft and Sidecar. And its “surge pricing” scheme, under which the cost of a ride rises algorithmically and sometimes significantly when demand is high, has sparked waves of criticism from those unhappy about the higher fares – and the notion that Uber’s chauffeured rides, at times, may only be for the rich.
Still, as an increasingly urban population and cash-strapped Millennials turn away from car ownership and toward the idea of sharing rides, Uber made clear this year that it is positioned to become a staple of urban living.
Honorable Mention: WhatsApp and King.com
Watch out, Facebook and Snapchat. Mobile messaging has a new leader. WhatsApp, which lets users send free texts, photos, audio and video, announced this month that it has more than 400 million monthly users, with 100 million joining in the last four months. In a crowded field targeting fickly consumers, WhatsApp is emerging as the winner, at least for now. Also, no look at mobile winners can ignore King.com’s Candy Crush Saga. The company said last month that the addictive game had been installed more than half a billion times on Facebook and mobile devices. The game maker delayed a planned IPO, but 2014 may be the year it goes public.
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