The past three weeks haven’t been particularly kind to optimists, with the S&P 500 falling an average of two out of every three sessions. Concerns about the imminent paring back of the Federal Reserve’s monetary easing program known as QE3 and what effect that might have on the housing sector, hiring, and consumer spending is proving to be enough of a gray cloud to push the broad-based S&P 500 a tad lower.
But if you look at the bigger picture we’ve witnessed an incredible run from the S&P 500’s lows set in March 2009. Unemployment has fallen, housing has normalized, and consumer confidence is near its highest levels in years. In fact, the S&P 500, even with its three-week swoon, is up 16.2% year to date, which is double the average historical return of 8% that most financial analysts will allude to.
Source: Jenny Cestnik, Flickr.
King of the hill
One company that’s been instrumental in that rally is streaming content service provider Netflix, Inc. (NASDAQ:NFLX), whose shareholders have witnessed a dramatic reversal of fortune in 2013. Shares are up, through Thursday, by a whopping 191%, and Netflix has pretty much perched itself atop the S&P 500 as the biggest year-to-date gainer for all but a few trading sessions.
Aiding Netflix, Inc. (NASDAQ:NFLX)’s huge run has been a push away from DVDs, which are a slowly eroding business and a strategic move toward streaming content — especially in overseas markets. In Netflix’s latest quarter, the company reported a 26% increase in streaming revenue, with international streaming revenue up 155%. The company is also on pace, based on its most recent quarter of growth, to end this fiscal year with as many as 40 million paying members worldwide. Netflix isn’t cheap by any means, but it’s worked hard on correcting its previous issues.
Is a coup d’etat on its way?
While Netflix, Inc. (NASDAQ:NFLX)’s results and shareholder returns have been impressive, other companies within the S&P 500 have been nipping at Netflix’s heels for that elusive top-spot ranking. This has me wondering: Does Netflix have what it takes to continue its run higher, or will another company replace Netflix as the year’s biggest gainer within the S&P 500?
Does not compute
Big-box electronics retailer Best Buy Co., Inc. (NYSE:BBY), depending on which day you choose to run your comparisons, was topping Netflix, Inc. (NASDAQ:NFLX) as of Thursday’s close with a gain of 201% on the year, but it has trailed Netflix for practically all but a handful of days the remainder of the year — thus why I consider Netflix the name to dethrone here and not Best Buy.
Best Buy Co., Inc. (NYSE:BBY) had essentially been written off for dead earlier in the year; however, I was one of few investors who had faith in the chain retailer. By focusing on mobile products, smaller store fronts, and empowering its associates to price-match its primary online competitor Amazon.com, Best Buy has been able to reverse a negative trend in EPS and recent surpassed Wall Street’s EPS expectations of $0.12 by $0.20! Despite the triple, sales are anticipated to fall nearly 14% this year and remain flat next year as Best Buy reins in costs. Might that be a bit pricey for a company trading at 14 times forward earnings? While I do like the Best Buy Co., Inc. (NYSE:BBY) long-term story, I’d certainly say so.
