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5 Stocks that Outperformed the S&P 500 in Q1

Zacks Equity Research

We have just crossed the first quarter of 2017 and now is possibly the best time to take a look at the past three months. The January–March quarter was quite impressive, courtesy of better economic conditions, bullish earnings forecasts and optimism over the Trump’s policies.

Impressive Performance in Q1

In the first quarter, the Dow and Nasdaq gained 4.5% and 9.8%, respectively. The S&P 500 recorded an increase of 5.5%, its strongest first-quarter performance since 2013. Backed by Donald Trump’s surprise victory, the benchmark indexes were in the green for the quarter. However, U.S. oil prices recorded their worst quarterly loss (of 5.7%) since late 2015 owing to resurgence of exploration and production by U.S. shale payers.

This was in sharp contrast to stocks’ losses during March. Over the last month, the Dow and S&P 500 declined by 0.7% and 0.8%, respectively.  In contrast, the Nasdaq recorded a 1.5% increase. The first-quarter rally slowed this month, after the Trump administration took a hit following the failure to secure adequate votes to pass a new health care bill through the House of Representatives.

The Trump administration suffered a major setback after the health care bill intended to repeal and replace Obamacare was pulled from the House on Mar 24, once it became clear that there will not be enough votes to pass the bill. The House was initially scheduled to vote on the new law on Mar 23 but the vote was postponed amid concerns regarding the bill failing to garner enough support.

Substantial Jump in January & February

The quarterly gains were mainly driven by the strong performance in January and February. In January, the Dow, S&P 500 and Nasdaq recorded increases of 0.5%, 1.8% and 4.3%, respectively. This marked the third consecutive monthly gain for the major benchmarks. Forecasts of improved economic growth and bullish corporate earnings helped U.S. stocks log their first monthly gains in five years. (For more details: 5 Best Performing Stocks of January)

The performance in February were even stronger with the Dow, S&P 500 and Nasdaq recording increases of 4.8%, 3.7% and 3.8%, respectively. We believe that the growing optimism about Trump’s economic agenda was the main reason for the improvement. In particular, Trump’s promise to bring back millions of jobs to the U.S. caught investors’ attention. (For more details: 5 Best Performing Stocks of February)

Economic Data Bullish, Rise in GDP

Despite skepticism about the sustainability of Trump’s trade policy, economic data has remained encouraging. We believe that it was the driving force for the recent gains.

The ISM Manufacturing Index, which gauges the economic activity in the manufacturing, has risen in all the three months of the concluded quarter. Its services counterpart also displayed improvement. Though retail sales have displayed a similar trend, its last increase of 0.1% was relatively muted.

The U.S. economy registered growth of 2.1% in fourth-quarter 2016. Consumer spending, which accounts for more than two-third of the economic activity, was revised upward. In fact, consumer spending grew 3.5% in the quarter. Moreover, corporate profits increased, indicating economy strength in early 2017.

Decrease in Unemployment

Employers added almost half a million jobs in the first two months of 2017. As many as 235,000 new jobs were created in February. The unemployment rate fell to 4.7% in February from 4.8% in January. Also, wages for American workers increased 0.2% in February to $26.09 an hour. (For more details: 5 Stocks to Buy as Consumer Confidence Hits 16-Year High)

5 Stocks Outpacing S&P 500 in Q1

Selecting lucrative stocks in view of the impressive developments is not an easy task. We have employed our proprietary screening methodology to pick five companies with a Zacks Rank #1 (Strong Buy) or 2 (Buy). The firms also outperformed the S&P 500 Index’s gain of 5.5%.

Boston, MA-based Vertex Pharmaceuticals Inc. VRTX is focused on the discovery, development, and commercialization of small molecule drugs targeting serious diseases. The company’s main area of focus is cystic fibrosis (CF).

The stock gained 43.5% in first-quarter 2017 and carries a Zacks Rank #2. It had an average earnings surprise of 243.75% in the last four quarters.

New York-based Arconic Inc. ARNC, formed by the split-up of aluminum giant Alcoa Inc., is a global leader in multi material, precision engineered products and solutions for a variety of industries.

Arconic shares appreciated more than 37% during first-quarter 2017. The Zacks Rank #2 company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 79.97%.

Idaho-based Micron Technology Inc. MU has established itself as one of the leading worldwide providers of semiconductor memory solutions.

The stock skyrocketed 27% during first-quarter 2017. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings surprise history is impressive as its earnings outpaced the Zacks Consensus Estimate in three of the prior four quarters with an average positive earnings surprise of 23.49%.   

Based in Santa Monica, CA, Activision Blizzard Inc. ATVI is a leading developer and publisher of console and online games. In 2015, it was named as one of the Fortune 500 companies. Activision reported $6.6 billion in revenues in fiscal 2016.

The stock soared more than 36% during the January–March period of 2017. Presently, Activision carries a Zacks Rank #2 and its earnings beat the Zacks Consensus Estimate in each of the last four quarters with an average positive earnings surprise of 33.88%.

Headquartered in Delaware, NJ, IDEXX Laboratories Inc. IDXX is a developer, manufacturer and distributer of products and services, primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets.

IDEXX’s stock jumped 31.4% during first-quarter 2017. The company, which holds a Zacks Rank #2, saw its earnings surpass the Zacks Consensus Estimate in all the prior four quarters with an average positive earnings surprise of 14.68%.

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IDEXX Laboratories, Inc. (IDXX): Free Stock Analysis Report
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