With millions unemployed as Thanksgiving approaches, I can't think of many people who are counting their blessings these days, except maybe Goldman Sachs Group (GS) employees who are getting a chunk of the investment bank's $23 billion bonus pie. But that's only 31,700 people out of 305 million Americans.
Yet it's possible that some Americans could have bought shares in 10 stocks that have had a great 2009 so far. And two of those 10 could give you reason to be thankful when Thanksgiving rolls around again in 2010. Thanks to SeekingAlpha, we have the top 10 stocks in the 10 sectors of the Standard & Poor's 500 Index, which was up 20% from the beginning of 2009 to Nov. 17. Before getting into the best performing stocks in each sector, let's look at the 10 top performing sectors (with the average percentage stock price increases of each sector's top 10 companies through Nov. 17):
Consumer discretionary +170%
Health care +112%
- Materials +100%
- Consumer staples +72%
- Industrials +62%
- Utilities +30%
- Telecom +8%
I think the reasons why consumer discretionary stocks were up the most -- and Telecom stocks climbed the least -- defy a simple explanation. But examining the top performing stocks in each category and their price/earnings (P/E) relative to their earnings growth reveals the ones that I think are worth further investigation.
Of these sectors' top 10 performing stocks of 2009 (through Nov. 17) with the lowest Price/Earnings to Growth (PEG) ratios, these two look like the best bets:
Health Care. Tenet Healthcare (THC) +393% in 2009 with a low PEG of 0.30 -- trailing P/E of 14 on 46.5% earnings per share (EPS) growth to $0.21 in 2010.
These two look a bit riskier since they did not make a profit over the last 12 months, but they are expected to do so in 2010. Their PEG ratios are based on forward P/Es (based on 2010 earnings estimates):
These two are looking pretty expensive:
SprintNextel (S), +90%, looks like it will lose money in 2009 and 2010, so I would avoid it. And I am not very excited about Flowserve (FLS), +108%, or XL Capital (XL), +383%, because they are both expected to suffer declines in earnings in 2010 of 1.3% and 7.1%, respectively.
Peter Cohan is a management consultant, Babson professor and author of nine books, including Capital Rising (due in June 2010). Follow him on Twitter. He has no financial interest in the securities mentioned.