The Best S&P 500 Stocks of 2018

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After a strong 2017, the S&P 500 and the stock market overall suffered a tumultuous 2018, seeing the worst year in a decade. The S&P 500, the primary gauge of the large-cap U.S. equities market, suffered a decline of 6.2%, its worst performance since 2008, amid the financial crisis, when it lost 38.5%. Based on available historical data, the index has generated an average annual return of around 9.8% from 1928 through 2016.

The S&P 500 is based on the market capitalization figures of the 500 biggest companies listed on the NYSE or NASDAQ. The S&P 500 has almost $10 trillion worth of financial products indexed or benchmarked to it.

Most of the losses occurred in the fourth quarter when stocks were pressured by fears about an economic slowdown, Federal Reserve policy and the ongoing trade negotiations between China and the U.S.

Yet despite a tough year, some stocks and sectors did manage to prevail. Here’s a look at some of the best-performing stocks in the S&P 500.

Advanced Micro Devices

Advanced Micro Devices (AMD) was the No. 1 best-performing stock in the S&P 500 in 2018. With a market cap of $19.41 billion, the Santa Clara, Calif.-based semiconductors specialist gained 79.6%, rebounding after declining 9.3% in 2017.

AMD’s earnings benefited from higher demand for its new central processing units (CPUs), used in traditional electronics like computers and video games; increased demand for its graphics cards (GPUs), used in the evolving cryptocurrency and blockchain space, and in cloud computing applications and data center operations. AMD also got a leg up when its competitor Intel, Inc. (INTC) was hit by production issues that resulted in an undersupply of its 10-nanometer (nm) chip.

However, AMD’s rally was even bigger earlier in the year, when it at one point was up more than 100% year-to-date; it too suffered a fourth-quarter selloff. The decline was in tune with the rest of the market but also specific to AMD: It is expected to launch its 7-nm chip that will allow it to compete with Intel, but some analysts think the impact for AMD will be minimal since Intel’s 10-nm will hold on to its market share. AMD’s stock also suffered amid the recent scale back in cryptocurrency mining interest and Intel’s sooner-than-expected fix of its 10-nm chip issues.

Abiomed

Abiomed (ABMD) was the second-best performing stock in the S&P 500 in 2018. The Danvers, Mass.-based health care technology and medical device maker gained 73.4% last year, after rising 66.3% the previous year.

Abiomed is a device maker focused on the heart and is known for making minimally invasive heart pumps. The company’s stock price rallied through June but seesawed the rest of the year. Highlights included a double-digit rally in September after the company presented data showing the use of its Impella heart pump led to an increase in the survival rate of patients suffering from cardiogenic shock. As Abiomed is a high-growth, high-beta stock, its October and December sell-offs can likely be attributed to the broader market declines. The company reported better-than-expected third quarter results, announced in November. The quarterly results showed that revenues from the Impella heart pumps jumped by 38% year over year. Abiomed also boosted its fiscal 2019 guidance. It’s expected to focus on continuing to expand its Impella devices across broader geographic markets in 2019.

Fortinet

Fortinet (FTNT) was the third-best performing stock in the S&P 500 in 2018. The Sunnyvale, Calif.-based global cybersecurity solutions provider gained 61.2% last year after gaining 45.1% in the previous year.

The company develops and markets cybersecurity software and appliances and services, including firewalls, anti-virus, intrusion prevention, and endpoint security. Unlike the top two performers of the year, Fortinet’s stock gains were slow and steady throughout 2018. Shares were boosted a strong 52% year-over-year increase in second-quarter earnings and a 21% year-over-year increase in revenue. Cybersecurity stocks such as Fortinet have also benefited in a year in which there were increased concerns about online frauds and security breaches, reports of high-profile companies suffering data hacks, misuse of user information, and security flaws.

In September, the company launched the FortiNAC product line for Internet of Things (IoT) services; as a result, Gartner recognized the company as a leader in unified threat management (UTM). In 2019, the company is expected to receive a boost from the connectivity boom and 5G services.

Other Standouts in 2019

The health care sector was the best-performing of the S&P 500’s 11 sectors, posting gains of more than 4%. The best health care performers of 2018 included: Abiomed (ABMD), detailed above; Illumina (ILMN), which deals in the area of genetic variation of biological function, jumped 54.2%; and HCA Healthcare (HCA), a holding company that owns and operates hospitals, which gained 53.6%. (See more: Top 5 Health Care Stocks of 2018 by Performance).

Source: Investopedia