Stock Picking Is Everything

By Eric Fox | January 22, 2010 AAA

Although the overall stock market continues to climb patiently towards its previous high, reached in October 2007, many stocks have already reached and exceeded the levels they were trading at then. (Before you implement your investment strategy, read Is Stock Picking A Myth?)

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The S&P 500 peaked at the mid 1500 level in late 2007, and since that time dozens of the stocks in the S&P 500 are trading above the levels they were selling for at the market peak.

Stocks Over The Peak
The Priceline.com (Nasdaq:PCLN) S&P 500 stock has seen steady gains since the market peak in October 2007, pulling in an increase of 122%. The story for Priceline is earnings growth, which has increased by more than 70% annually the last five years. Analysts are expecting this to continue and have estimated earnings pegged to grow at 21% annually for the next five years.

Southwestern Energy (NYSE:SWN) rode to triumph on the back of its successful development of its properties in the Fayetteville Shale, where the company was the first mover and still recognized leader of that shale play. This stock is up 84% from the peak.

Coal Heats Up
Massey Energy (NYSE:MEE) is up 55% from October 2007. The company is an Appalachian coal company with mines in West Virginia, Kentucky, and Virginia. Massey Energy has coal reserves of approximately 2.3 billion tons.

The market has bid up the stock price of many coal companies, anticipating a recovery in the economy in 2010. The street predicts that Massey Energy's earnings will be $2.16 in 2010, up from $1.03 in 2009.

Both Southwestern Energy and Massey Energy made this list because its earnings are closely tied to the commodity cycle, yet these stocks did not rise to their full potential with the overall stock market when it reached its peak in October 2007. Most energy stocks kept rising with commodity prices, until that bubble popped in mid 2008.

Western Digital (NYSE:WDC) manufactures hard drives for various devices including personal and notebook computers, workstations and networking equipment. The company is up 71% since the market peak. Western Digital has seen earnings estimates move up rather rapidly the last few months as investors anticipate a full economic recovery. Earnings estimates for fiscal 2011, which ends in June 2011, have moved up from $3.82 to $4.72 per share.

Mastercard Inc. (NYSE:MA) is up 37%, and this credit card and transactions services company has seen its fortunes ebb and flow with the credit crisis the last two years. Mastercard lost half its value during that time but has since come back strong. Analysts are looking for double-digit growth in earnings in 2010, and the company may surpass that growth as it has beaten estimates by large margins for four straight quarters.

The Bottom Line
Although the indexes are still selling below its peak levels, the large moves by many of the component stocks proves the old cliché that stock picking is, and always will be, everything when it comes to investing. (For an in-depth analysis on stock picking, check out Stock-Picking Strategies: Introduction.)

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