3 Stocks That Tripled This Year

Stocks have had a flabbergasting run this year. The S&P 500 index, which represents about three-quarters of the U.S. stock market by value, is up more than 60% from its March low and more than 20% year-to-date.
But that’s nothing compared with the three companies listed below. Their share prices have more than tripled this year. And these aren’t tiny companies. Together they’re valued at more than $38 billion, up from about $11 billion at the beginning of the year. Of the three, one still looks cheap, another seems expensive and the third is, well, difficult to judge.

Up 270%

Earlier this week I mentioned hard-drive maker Western Digital (WDC) in a look at companies that recently trounced earnings forecasts. Seagate Technology (STX) fits that description, too. Both stocks have tripled this year but Seagate is up a touch more. Investors abandoned such stocks earlier this year on fears that a fall-off in consumer spending would hit computer hardware makers particularly hard, but spending in general has picked up a bit; computers proved less economically sensitive than feared; and the hard drive business, after a string of large mergers in recent years, benefitted from careful management of inventories. Both stocks still seem like excellent deals. Seagate is the cheaper of the two at just seven times earnings, versus eight times earnings for Western Digital, but the latter has a cash surplus. Western Digital also has faster sales growth and wider margins.

Up 199%

Organic grocer Whole Foods (WFMI) enjoys gross profit margins of 34 cents on the dollar, versus 26 cents for the average chain, because it charges higher prices. It can do so because its customers tend to be loyal. If they’re like me, they generally want to avoid chemical-y foods and animal mistreatment, but they don’t have time to run a background check on every ham sandwich, so they prefer a store that looks into that stuff for them. If they live in a big city like New York City, where I live, they’re especially pleased to find a supermarket that’s not dirty and smelly, and that keeps the lines moving fast. That said, high unemployment has strained family budgets over the past year, and that has hit Whole Foods harder than its peers. Although many grocers are having a banner year because consumers have forsaken restaurants in favor of meals at home, sales at longstanding Whole Foods stores began to dip in the first quarter. But just as Whole Foods shares got hit much harder than the average stock when the broad market was falling from October 2007 to this past March, they’re rising much faster now. Whole Foods, more so than Kroger (KR) or Safeway (SWY), has a lot riding on an economic recovery. As much as I find the stores worth their price premium, the company’s shares, at 26 times foreword earnings, are too rich for my tastes.

Up 263%

Ford (F) turned a profit in its third quarter. Companies do that all the time, of course, but Ford last year lost $14.7 billion, or more than half its current stock market value, after having lost $2.7 billion the year before and $12.6 billion the year before that. The company is likely to post a loss for the full year, although early forecasts call for a small profit next year. Other bright points? Unlike General Motors, Ford has thus far avoided bankruptcy, which might resonate with customers. Its stock market value is a pittance relative to the company’s sales; the stock’s price/sales ratio is 0.2, versus a median of 1.4 for the S&P 500 index. If the U.S. car business turns solidly profitable again, Ford shares could continue their ascent, but the stock’s long history of hope followed by disappointment suggests there are better bets out there.