The Best and Worst Performing Stocks Since the March 2009 Start of this Historic Bull Market

The current bull market is now 9 years old. That's an interesting fact, but how significant is it? Not very, in my opinion. Age isn't very relevant when trying to anticipate what lies ahead. More relevant are things like valuation, the health of the economy, the geopolitical landscape, and the mood of consumers and investors.

I have my own views about where we are likely headed from here, and I've shared those views often, as many of you know. My approach is based on probability estimates of possible outcomes for the economy and the stock market. I use a 12 month time frame in my models, and when the probabilities of improving conditions are high, I advise clients to be aggressive with their risk profiles. As the probabilities begin to fade, I advise dialing back on risk in stages. 

You can read about my methodology by visiting my blog, or my articles on SeekingAlpha and AdvisorPerspectives. Today I want to address the winners and losers since the last bear market ended in March 2009. What I hope to learn from this exercise is two things. First, are there any underlying trends that have endured throughout this 9 year bull market? And second, are there any stocks that seem well-positioned for continued success in an aging bull market? Conversely, are there stocks that should be avoided? 

In an attempt to keep this research project manageable, I limited my search to the 1,500 stocks that are included in the S&P 1500. After eliminating those that were added to the index after the bull market began, I ended up with 1,322 names. They include large, mid, and small cap companies. They represent 16 market sectors (there are 11 "official" sectors, but I expanded that to 16 to get a little more granularity). 

The Excel spreadsheet that I created encompasses price performance, market cap, current ratings from Zacks Investment Research, Thomson Reuters, S&P Global, and independent research providers. I will provide a summary of the top and bottom 10 names from this study, and I will make the full spreadsheet available to anyone who is interested in taking a deeper dive into the numbers.

The first thing that jumps out is, how can a stock be up 24,704% in nine years or 2,745% per year? Two things. These are highly successful companies who barely escaped the jaws of death in 2009, and went on to thrive in a post-global financial meltdown world. Credit where due. 

But we can't ignore the fact that these performance numbers have the great advantage of starting from a small base. The average starting price for these winners was $1.87, and the lowest was $0.25 cents. Should we discount the success of these companies because of an artifact of arithmetic? No! That would be like saying the long-shot winner of a horse race should be disqualified because she was one step away from the glue factory when she entered the starting gate.

Take the #1 stock, Patrick Industries, for example. Here's the company profile:

Patrick Industries, Inc. manufactures and distributes building products and materials for the recreational vehicle, manufactured housing, and industrial markets in the United States and Canada. It manufactures and fabricates decorative vinyl and paper laminated panels; fabricated aluminum products; wrapped vinyl, paper, and hardwood profile moldings; solid surface, granite, and quartz countertops; cabinet doors and components; hardwood furniture; fiberglass bath and shower surrounds and fixtures; softwoods lumber; simulated wood and stone products; and others. The company was founded in 1959 and is based in Elkhart, Indiana.

The story here is obvious. This company could not have been in a worse market at the depth of the housing bust in 2009. That's why the stock was trading at 28 cents per share. But to their great credit, they found a way to survive, and went on to become the #1 best-performing stock over the next nine years. And it's currently rated 1 by Zacks, and 8.7 by Thomson Reuters. It has solid and consistent earnings and sales growth. Should this stock be penalized because it was one step away from the glue factory in 2009? You decide.

You can go through the rest of the Top 10 list and find similar stories that explain their success. My takeaway is that these are companies that found a way to survive and succeed in spectacular fashion. Should you buy them today? Not necessarily. It depends on price and valuation. That's why you should always do your own due diligence before investing in any company, even the mega-winners.

Do you detect a pattern among the biggest losers since the bottom in 2009? No surprise that energy has struggled, or that retail & wholesale has struggled (thanks, Mr. Bezos). These stocks have lost 80-97% of their value, while the market has quadrupled. Is there any hope for these losers? 

Well, I see a few glimmers among them. It would take guts to step up to the plate, but that's what Buffett and the rest of the value crowd likes. The highest-rated names on this list are Avon, Denbury, and First Bancorp of Puerto Rico. Risky bets? Sure. But worth further investigation. 

And what about steady earnings growth? Avon again, and Denbury, and Southwest Energy. These companies might not make it in the end, but if they do, they are likely to be 10-baggers at least.

So, there you have it. I think these are interesting watch lists to explore. There's something for value aficionados, and for growth/momentum types. I own Netflix and Southwest Energy. I have no plans to add to either position over the next 72 hours.