A stunning fact is that when U.S. stocks as a group fell about 40% in 2008, the year of the financial crisis, some stocks nonetheless posted double-digit gains, according to the Financial Times. Those that bucked the trend so impressively had one thing in common, per analysis by research firm New Constructs cited by the FT: high returns on invested capital (ROIC).

Among those stocks were these seven, with their share price gains from the start of 2008 through Tuesday, per Investopedia data: toy maker Hasbro Inc. (HAS), 404%; tax preparer H&R Block Inc. (HRB), 101%; auto parts seller AutoZone Inc. (AZO), 400%; retailing giant Wal-Mart Stores Inc.(WMT), 112%; and biotech firms Gilead Sciences Inc. (GILD), 283%, Celgene Corp. (CELG), 532%, and Amgen Inc. (AMGN), 361%. All these companies had high levels of ROIC going into 2008, the FT notes.

In fact, a basket of these seven stocks would have beaten the S&P 500 Index (SPX) handily, which is up by 73% over the same period. The average gain among those seven stocks is, by contrast, a stunning 313%. (For more, see also: The Fall of the Market in the Fall of 2008.)

Importance of ROIC

Significant research indicates that the long-term value of a company depends on its ability to generate sustainable returns from its capital base, and that's what ROIC attempts to measure, the FT says. Meanwhile, alternative explanations for the 2008 outperformance of the seven stocks listed above do not seem to fit the facts.

Rather than being uniformly "cheap,"  some of these stocks had trailing P/E ratios that were more expensive than the market going into 2008, and the others were not significantly underpriced on this basis, the FT indicates. As far as being in "defensive" sectors goes as an explanation, the FT finds that particularly hard to believe with respect to toys and auto parts. Indeed, the FT notes that key competitors of Hasbro and AutoZone did not do nearly as well in 2008. While drug stocks might be considered to be defensive, Amgen, Celgene, and Gilead are in the highly volatile biotech sector, developing cutting-edge treatments rather than marketing staple, tried-and-true remedies. The FT adds the tongue in cheek observation that the inevitability of taxes makes H&R Block perhaps the only truly defensive play of the seven. (For more, see also: The 2007-08 Financial Crisis in Review.)

Today's ROIC Leaders

Computer and smartphone maker Apple Inc. (AAPL) is currently ranked by New Constructs as the ROIC leader in the S&P 500, per the FT. Also included in the top 25 are other big names in technology, such as Facebook Inc. (FB), Google parent Alphabet Inc. (GOOGL) and Microsoft Corp. (MSFT). All these companies have ROIC values in excess of 27%, and also have outperformed the S&P 500 since the start of 2008, the FT says, adding that leadership in ROIC undercuts some of the concerns about excessive valuations among tech stocks.

Payments processor MasterCard Inc. (MA), meanwhile, comes in second to Apple in New Constructs' computation of ROIC, with a staggering figure of 88%, the FT reports. MasterCard stock is up by 595% from the start of 2008 to Tuesday's close. Note that computations of ROIC can vary widely among data sources. As a result, it is important to look at explanatory notes when using this data.


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