Large cap winners in April consisted of industrial, basic material and financial stocks that the market had thrown out only a few months ago. Investors who were lucky or skilled enough to bottom fish in these sectors were rewarded with several years worth of returns.
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Ford Motor (NYSE:F) was the best performer in April, rising 127% for the month. The company successfully completed a debt exchange that cut its debt by $9.9 billion and was upgraded by Standard & Poor's. Ford's decision to not ask the government for money to bail out its operations was probably the best it ever made, giving the company privacy and flexibility to fix its operations.
American Express (NYSE:AXP) rallied all month along with the rest of the financial group, and then got a kick of its own when it reported first-quarter earnings. American Express reported $361 million in earnings attributable to common shareholders in the Q1. Since the company is regulated as a bank holding company, investors were also watching its tangible common equity ratio, which came in at 10.1%. An interesting point is that subsequent to this report, the company was downgraded by Standard & Poor's, which cited "concerns over funding and liquidity". The stock ended the month up 87%.
Johnson Controls (NYSE:JCI) is in the unenviable position of being a major supplier to Ford Motor and General Motors (NYSE:GM), but that didn't dissuade investors from pushing the stock up 58% in April. The company posted a loss in the Q1 but said the rest of the year would be profitable, adding that vehicle demand was returning. Stephen A. Roell, CEO, said "There are some signs that markets are stabilizing." (Find out what to consider before taking a ride with stocks from this industry; check out Analyzing Auto Stocks.)
Dow Chemical (NYSE:DOW) has seen its earnings suffer from the recession and the resulting drop in demand for chemicals this past year. The stock bottomed at $5.80 per share in March and has since nearly tripled, finishing up 89% in April. The company surprised the Street by reporting a profitable Q1 last week. Although the profit was small relative to its size, the report might have convinced investors that the materials sector will survive this recession.
Prudential Financial (NYSE:PRU) rose 51% in April. The company got a boost along with other insurers early in the month, when the government indicated that insurance companies would be allowed to receive funds from the Troubled Asset Relief Program (TARP). There was no other company-specific news in April for Prudential, and the company doesn't report earnings until May 6. According to Thomson Financial Networks, current EPS is estimated at 83 cents, way down from $1.21 a month ago. (Learn about TARP in Liquidity And Toxicity: Will TARP Fix The Financial System?)
Downtrodden Market Sectors Surged
The most beaten up market sectors continued their slow climb out of their trough as April saw financials, basic materials and industrials surge higher. These sectors' comeback stoked the debate between bulls and bears on whether the rally in the stock market was for real.