While the bull market rumbled higher in the first quarter, the gains in the major indexes understated the strength.
According to an IBD analysis, nine IBD indexes or screens outperformed the S&P 500 in the first quarter while five topped the Nasdaq's big gain.
The S&P 500 rose 12% in the first quarter while the Nasdaq thrust ahead 18.7%. The NYSE composite and the Dow Jones industrial average lagged with single-digit gains.
The performance of the major indexes paled vs. several IBD screens.
The top IBD screen was the Nasdaq components of Stock Spotlight, which leapt 33.9%.
The screen, today on Page B4, focuses on fundamentally strong stocks that are breaking out of bases or hitting highs. It has a history of identifying winners early.
During Q1, stocks that popped in the Nasdaq portion of the screen and their Q1 gains included yoga apparel retailer Lululemon Athletica (NASDAQ:LULU - News), 60%; Apple (NASDAQ:AAPL - News), 48%; Alexion Pharmaceuticals (NASDAQ:ALXN - News), 30%; and Spirit Airlines (NASDAQ:SAVE - News), 29%. The second-best performing screen was Stocks Just Out Of Bases, which is on Page B3. The screen jumped 31.9% in Q1.
Stocks that appeared in this screen and their Q1 gain include mattress provider Tempur-Pedic (NYSE:TPX - News), 61%; restaurant chain Buffalo Wild Wings (NASDAQ:BWLD - News), 34%; and Latin American online marketplace MercadoLibre (NASDAQ:MELI - News), 23%.
The Top Sector Stocks provided the third-best performance, up 24.8% in Q1.
This screen determines which stocks are highlighted at the top of a sector in the NYSE + Nasdaq Research Tables, starting on Page B3.
During the quarter, the sector leaders and their gains included motion-sensing chipmaker InvenSense (NYSE:INVN - News), 82%; cloud computing stock F5 Networks (NASDAQ:FFIV - News), 27%; and China-based Internet search engine Baidu (NASDAQ:BIDU - News), 25%.
There's no doubt that IBD screens and the IBD 50 work better in a healthy bull market than they do in choppy markets.
Last year, blue chips led in a year of hesitant action. The IBD 50 rose 3.8% in 2011, outperforming most indexes but trailing the Dow, which rose 5.5%.
So far in 2012, the market has shown more clear-cut bullish action. In the first quarter, the IBD 50 advanced 19.7%.
Another strong-performing screen in Q1 was the bold issues in Nasdaq Stocks On The Move, up 19.3% and found on Page B1.
The screen looks for stocks with above-average volume. This points to institutional demand. Boldfaced stocks in the list have EPS and RS ratings of 80 or better.
The top performers in Q1 were a mix of the new and the proven.
Apple, Lululemon, and Priceline were stocks that notched nice gains despite long runs before their latest moves. Initial public offerings also did well. They included InvenSense and upscale apparel marketer Michael Kors (NYSE:KORS - News) — both up more than 70% in Q1.
Does this uptrend have more left
The Nasdaq not only delivered a big gain in Q1, but kept things positive in each month. It rose 8% in January, then 5% and 4%.
The last time something similar happened was Q1 1998, when the Nasdaq rose 3%, 9% and 4% in the first three months. What happened next? The Nasdaq added 2% in April, seesawed for three months and then fell 20% in August before climbing again.
Trying to predict the market, though, is not a sound strategy. When the indexes delivered a follow-through day on Dec. 20, there wasn't any reason to feel bullish.
This is where the IBD rules come into play. A follow-through day should never be ignored because conditions don't feel right to you. Open half positions and complete the buys if the action pulls you in.
IBD's features — such as the Stock Spotlight, the IBD 50 and the Sector Leaders — will help you find the right stocks to buy.