The Standard & Poor's 500 index — commonly called the S&P 500, or simply the S&P — is the primary gauge of the large-cap U.S. equities market. It is based on the market capitalization figures of the top 500 companies having their common stock listed on the NYSE or NASDAQ. The popular index has almost $10 trillion worth of financial products indexed or benchmarked to it.
Based on available historical data, the index has generated an average annual return of around 9.8 percent from 1928 through 2016. In 2018, however, the annual return from the S&P 500 index was negative and stood at around -2.76 percent between Jan. 2, 2018 and Dec. 14, 2018. The S&P 500 is hovering in the range of 2,600 as of mid-December, with expectations of closing the year within plus/minus 100 points. Last year, the index posted a healthy annual gain of around 19.5 percent. Based on the reports from various investment firms, the predictions for 2019 vary widely with claims of the index ending 2019 anywhere between the broad range of 2,750 to 3,350.
A few factors have roiled overall market returns this year. The rising interest rate environment, fragmented and limited expansion of the global economy, negative impacts of the U.S.-China trade war, a combination of geopolitical and financial turmoil in emerging markets, and the late-stage technology sector-led decline clubbed with credit market sell-off all contributed to the overall market decline. In the S&P 500 index universe, healthcare has emerged as the best performing sector for the current year. It was followed by the utilities and consumer discretionary sectors. Materials, communication services, energy, and industrials were the worst performing sectors, in that order, and dragged down the overall market.
Beyond the sectors, let’s look at the top performing individual stocks of the S&P 500 index that helped the index stay afloat this year. The list is presented in the order of year-to-date (YTD) performance based on the opening stock price as of Jan. 2, 2018 and closing price as of Dec. 14, 2018.
1. Advanced Micro Devices, Inc. (AMD)
- Market Cap: $19.41 billion
- Price Change: +$8.92
- Performance against the S&P 500: +81%
2. TripAdvisor, Inc. (TRIP)
- Market Cap: $8.12 billion
- Price Change: +$25.93
- Performance against the S&P 500: +75%
3. Abiomed, Inc. (ABMD)
- Market Cap: $13.62 billion
- Price Change: +$123.7
- Performance against the S&P 500: +65%
4. Fortinet, Inc. (FTNT)
- Market Cap: $12.03 billion
- Price Change: +$28.56
- Performance against the S&P 500: +65%
5. Advance Auto Parts, Inc. (AAP)
- Market Cap: $11.71 billion
- Price Change: +$57.69
- Performance against the S&P 500: +55%
Advanced Micro Devices, Inc.
The Santa Clara, Calif.-based semiconductors specialist Advanced Micro Devices, Inc. (AMD) has been the best performing stock of 2018 with an annual gain of more than 81 percent. AMD's earnings were boosted by increased demand for the company's new central processing units (CPUs), which are used in traditional electronics like computers and video games. The business was also handily supported by a booming demand for its graphics cards (GPUs), which find use in the rapidly evolving cryptocurrency and blockchain space as well as in the cloud computing applications and data center operations. The company also benefited earlier this year when its competitor Intel, Inc. (INTC) struggled with production problems that led to an undersupply of its 10-nanometer (nm) chip.
AMD is expected to launch its 7-nm chip which will allow it to compete with Intel, though a few analysts opine that it may not be able to generate big gains for AMD because Intel’s 10-nm will still maintain its own market share. However, the significant decline in cryptocurrency mining mania and the news of Intel fixing the 10-nm chip production problem sooner than expected halted the dream run of AMD. It resulted in a steep decline in the stock price during the latter half of the year. Though the AMD stock price is down more than 60 percent from the handsome triple-digit YTD gains realized during September, it remains the leader in the S&P 500 index with the best returns for 2018.
The Needham, Mass.-based online travel company TripAdvisor, Inc. (TRIP) stands second in the list of the best performing S&P 500 stocks for 2018. Operating with two segments, hotel and non-hotel, the stock of the leisure company generated an annual return of 75 percent this year. While its hotel segment had a modest performance, the stock price got a major boost during the second quarter when its non-hotel segment saw significant year-over-year (YOY) growth of 37 percent. The momentum continued carried into the third quarter, which saw a 20 percent increase in revenue from the non-hotel segment, including tours, restaurants, and other leisure activities. The stock struggled during the earlier part of the year as it faced increasing competition and changes in travelers’ habits. However, the company was successful in cutting down on its marketing expenses and expects to reap continued benefits from product enhancements, platform expansion, and marketing optimizations in the future.
Abiomed, Inc. (ABMD) is a healthcare sector company responsible for making minimally invasive heart pumps. With an annual return of around 65 percent, it stands third in the list of this year's best-performing stocks. Following a steady rise in stock price through June, Abiomed has been a seesaw ride during the second half of the year. In September, the stock price jumped by double-digits when the company presented data indicating that use of its Impella heart pump led to an increase in the survival rate of patients suffering from cardiogenic shock. Being a high-growth, high-beta stock, company declines in October and December should be attributed to the market-wide sell-off. In November, the company beat on earnings for the quarter ending September 2018, which showed that revenues from Abiomed's Impella heart pumps increased by 38 percent year-over-year. Backed by the solid financial performance, Abiomed also raised its fiscal 2019 guidance. Abiomed is expected to focus on expanding its line of Impella devices across indications and geographical markets as it heads into 2019.
The global cyber security solutions provider Fortinet, Inc. (FTNT) holds the fourth rank among the best-performing S&P 500 stocks of 2018. Though the company's annual return of around 65 percent is comparable with that of Abiomed, its stock price performance has been comparatively consistent. Fortinet's stock price was boosted by a significant 52 percent year-over-year increase in earnings and a 21 percent year-over-year increase in revenue during the second quarter. The company saw heightened concerns around online frauds and security breaches in 2018, and there were multiple reports of high-profile online companies getting hit with data thefts, misuse of user information, and security flaws. It has helped stocks like Fortinet gain big amid speculations about the increased need for upgrades to firewalls and security systems by various online companies. In September, Fortinet launched the FortiNAC product line for Internet of Things (IoT) services, earning the company recognition as a leader in unified threat management (UTM) by Gartner.
Headed into 2019, the company is expected to receive a boost from the connectivity boom and 5G services.
Advance Auto Parts, Inc.
The Roanoke, Virg.-based Advance Auto Parts, Inc. (AAP) is the retail provider of automotive replacement parts and maintenance items. The stock has had a steady upwards run over the year and has generated around 55 percent annual return during 2018. Advance Auto Parts witnessed consistent growth in sales over the first half of the year in both its do-it-yourself (DIY) retail and DIY online segments, which helped it beat expectations on the Street. Earnings also got a boost from a lowering of U.S. corporate tax rate from 35 percent to 21 percent. In October, the company announced a strategic partnership with retail major Walmart Inc. (WMT) to create an automotive specialty store on the Walmart.com shopping portal. It is expected to help AAP gain a much larger market share. The increasing number of aging vehicles is expected to keep the growth momentum for the company in 2019, as well.