The United States' stock market, as measured by the S&P 500, had its best first quarter performance in 14 years, up about 12% for the first three months of the year. Here's a look at the three best performing stocks in the S&P 500.

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From Last to First

So far, 2012 has been the year of the contrarian. What ended 2011 as the most hated has suddenly become the most loved. Bank of America (NYSE:BAC) which declined some 60% in 2011 has been a different story to investors in 2012. For the first quarter of 2012, Bank of America was up around 71%. From a mathematical standpoint, anyone who owned Bank of America for all of 2011 is still underwater; it takes a 100% gain to make up for a 50% loss. But even after the first quarter surge, Bank of America shares, at $9.60, still trade for less than half of book value and less than 70% of tangible book value. Bank of America, on a price-to-book ratio (P/B), remains the cheapest of the big banks with names like Well Fargo (NYSE:WFC) trading for around 140% of book and Citigroup (NYSE:C) trading for roughly 60% of book value.

SEE: Book Value: How Reliable Is It For Investors?

Sears Holding (Nasdaq:SHLD), the department store chain retailer, has been suffering steep declines in sales and profits but is the best performing S&P 500 stock up over 120% during the first quarter. To be sure, that gain is a result of a quick sharp decline that sent shares to a record new low of $28.89. A couple of years ago, Sears' shares traded for nearly $200 a share. Despite being run by the able and competent Eddie Lampert, he's yet to find the retailing fix for Sears. Recently, the shares have responded positively to news that the company was shutting down stores and taking other capital restructuring efforts.

Coming in third place was online video streaming company Netflix (Nasdaq:NFLX), up almost 65% during the first quarter. Again, thanks to temporary events that led to a massive sell-off, the decline led to a mis-pricing of the shares. What once was a must own stock at $300 and a P/E ratio of 60 suddenly became a too risky to own stock at $70 with a P/E of 15. Shares now trade for about $110 with a P/E of around 26.

The Bottom Line

Interestingly the top three performing stocks in the S&P 500 were all names that suffered rapid and excessive sell-offs in 2011. Never mind that these companies all had a unique advantage such as management in the case of Sears, market leading growth from Netflix or a ridiculous discount to tangible assets for Bank of America. The performance of these three stocks is just one indication that value works when you buy mis-priced securities.

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At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.