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2018’s Biggest Stock Market Winners so Far

After a nearly perfect 2017 that saw big gains happen alongside mitigated volatility, the stock market hasn’t been able to replicate that success in early 2018.

Year-to-date, the S&P 500 is essentially flat. More than that, at one point in late January, the S&P 500 was up nearly 8% on the year. By the beginning of February, it was down 1% on the year.

In other words, the stock market of 2018 has looked very little like the stock market of 2017. Big gains have been replaced with sideways trading. And volatility has once again reared its ugly head.

But the broad market’s struggles don’t apply to every stock.

Thus far in 2018, the stock market has had some pretty big winners. And by big, I mean big. The market’s best-performing stocks have staged huge rallies of 50% and up thus far in 2018.

With that in mind, here are a few of the stock market’s biggest winners so far in 2018.

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Best-Performing Stocks #1: Netflix (NFLX) Netflix NFLX stock Source: via Netflix

Nothing seems to knock secular growth giant Netflix, Inc. (NASDAQ:NFLX) off its horse.

The other FANG names have struggled some in 2018. Facebook, Inc. (NASDAQ:FB) has been hit with data leak and personal privacy concerns. Alphabet Inc (NASDAQ:GOOG) is struggling to keep its margins up during a big investment period. Even Amazon.com, Inc. (NASDAQ:AMZN) has felt pressure recently due to regulatory threats.

But Netflix has faced zero meaningful threats so far in 2018. Meanwhile, the company continues to report strong beat-and-raise quarters that blow out expectations on every key metric from revenue to margins to earnings to subscribers.

That is why NFLX stock is up 70% year-to-date.

At this point, it seems that Netflix has reached escape velocity and is marching towards becoming the world’s biggest entertainment company. The Netflix streaming service just has such a powerful value prop (only $10-$15 per month for a seemingly unlimited library of exclusive content) relative to alternative entertainment options that global adoption at this point seem likes a question of when, not if.

That said, buyers should beware of valuation on Netflix stock at current levels.

I know that sounds silly for a stock that has done nothing but soar over the past several years, but even under bullish modeling assumptions of global domination and huge margin ramp, I still think the stock is only worth about $290.

Thus, at $320, it feels like the stock price has sprinted ahead of fundamentals in the near-term. In other words, if you want to buy this top-performing stock, it won’t hurt to wait for a meaningful pullback. 

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Best-Performing Stocks #2: Fossil Group Inc (FOSL) Fossil Group, Inc. (NASDAQ:FOSL) Source: Joe King via Flickr (Modified)

Not many people would guess this, but struggling traditional watch giant Fossil Group Inc (NASDAQ:FOSL) has actually outperformed streaming TV giant Netflix so far in 2018.

And its not because Netflix has struggled. Netflix stock is up 70% year-to-date. Fossil stock? It’s up 90%.

What is happening under the hood? Fossil is morphing into one of Wall Street’s most powerful turnaround stories.

For several quarters, Fossil fell victim to the smartwatch trend which destroyed the traditional watch market. Fossil’s core watch business tumbled. Sales got sliced. Margins were crushed. Net profits turned into net losses. And Fossil stock dropped from $130 to $5.

Yes, that is right. Fossil stock went from $130 to $5.

Seem overdone? It was.

Fossil wasn’t just laying idle as the smartwatch market killed its traditional watch business. They invested big into developing hybrid smartwatches, which are essentially the result of traditional watch fashion converging with smartwatch technology. Last quarter, FOSL gave the market signs that these hybrid smartwatches are starting to gain serious traction.

This momentum should persist.

Apple Watch won’t entirely dominate the smartwatch market. Instead, there will be multiple players in the smartwatch market, and one of the bigger players will be the company that most successfully integrates traditional watch fashion with smartwatch technology. Right now, Fossil is doing that best. Considering Fossil is the traditional watch giant, it is also pretty likely that Fossil continues to be the best at this for several years to come.

Meanwhile, Fossil stock is still at just $19. Again, this used to be a $130 stock. Therefore, it is pretty easy to conclude that if the smartwatch business continues to scale, Fossil stock still has a lot of room to run higher.

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Best-Performing Stocks #3: Chipotle Mexican Grill, Inc. (CMG) cmg stock Source: Shutterstock

The comeback in Chipotle Mexican Grill, Inc. (NYSE:CMG) has finally arrived. After the company hired a new CEO (who they stole from Taco Bell) and reported pretty good first quarter numbers, CMG stock has taken off and not looked back.

Year-to-date, CMG stock is up nearly 50%. And that includes a big drop in mid-February on bad Q4 numbers. Since then, CMG stock is up nearly 70%.

I was a vocal bear turned vocal bull on CMG stock. I hated the stock on the way down because it felt like health food trends had moved on from CMG and towards poke and superfood bowls. But then the tide started turning. Chipotle stores started filling up again, and the new CEO gave me faith that a Taco Bell-like turnaround was coming to Chipotle (that means targeted advertising, store redesigns, and menu innovations).

That said, after this blistering 70% rally off its 2018 low, CMG stock looks maxed out. The company faces a lot of competition in the quick casual restaurant space. Poke and superfood bowls are still very popular. Meanwhile, McDonald’s Corporation (NYSE:MCD) is actually reinventing themselves to be somewhat healthy with fresh beef patties and “Better Chicken” offerings (maybe not entirely healthy, but at least healthier than before).

Plus, margins will remain under pressure into the foreseeable future thanks to wage hikes.

Overall, then, if you put the current turnaround euphoria in context with the broader picture of a rebounding food chain in an only increasingly competitive QSR space, it is easy to see that CMG stock may have sprinted ahead of fundamentals in the near-term. Indeed, by my numbers, any price tag over $400 seems a little overdone here and now.

As such, while Chipotle has been one of the best-performing stocks so far in 2018, I expect gains from here through the rest of the year to be largely muted.

As of this writing, Luke Lango was long FB, GOOG, AMZ

Tower Bridge Advisors Has $18.33 Million Stake in McDonald's Co. (MCD)

Tower Bridge Advisors lowered its stake in McDonald's Co. (NYSE:MCD) by 3.9% in the 1st quarter, according to its most recent 13F filing with the Securities & Exchange Commission. The institutional investor owned 117,225 shares of the fast-food giant’s stock after selling 4,748 shares during the quarter. McDonald's accounts for approximately 2.0% of Tower Bridge Advisors’ portfolio, making the stock its 8th largest position. Tower Bridge Advisors’ holdings in McDonald's were worth $18,332,000 as of its most recent SEC filing.

Several other large investors also recently added to or reduced their stakes in MCD. Horan Capital Advisors LLC. bought a new stake in McDonald's during the 3rd quarter valued at $104,000. Pinnacle Wealth Planning Services Inc. bought a new stake in McDonald's during the 4th quarter valued at $109,000. Tarbox Family Office Inc. increased its stake in McDonald's by 105.8% during the 4th quarter. Tarbox Family Office Inc. now owns 638 shares of the fast-food giant’s stock valued at $110,000 after purchasing an additional 328 shares in the last quarter. Horan Capital Management bought a new stake in McDonald's during the 4th quarter valued at $110,000. Finally, Certified Advisory Corp bought a new stake in McDonald's during the 4th quarter valued at $121,000. Institutional investors own 68.12% of the company’s stock.

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MCD has been the subject of a number of recent research reports. JPMorgan Chase set a $186.00 price target on shares of McDonald's and gave the company a “buy” rating in a research note on Friday, January 12th. Credit Suisse Group set a $191.00 price target on shares of McDonald's and gave the company a “buy” rating in a research note on Tuesday, January 30th. Royal Bank of Canada set a $190.00 price target on shares of McDonald's and gave the company a “buy” rating in a research note on Tuesday, January 30th. Nomura boosted their price target on shares of McDonald's from $198.00 to $203.00 and gave the company a “buy” rating in a research note on Tuesday, January 30th. Finally, Goldman Sachs set a $200.00 price target on shares of McDonald's and gave the company a “buy” rating in a research note on Tuesday, January 30th. Eight investment analysts have rated the stock with a hold rating and twenty-five have issued a buy rating to the company’s stock. The company currently has an average rating of “Buy” and an average target price of $184.03.

In other McDonald's news, insider Douglas M. Goare sold 13,255 shares of the company’s stock in a transaction dated Tuesday, May 1st. The shares were sold at an average price of $165.40, for a total transaction of $2,192,377.00. The transaction was disclosed in a filing with the SEC, which is available through the SEC website. Also, EVP Kevin M. Ozan sold 18,636 shares of the company’s stock in a transaction dated Tuesday, May 1st. The shares were sold at an average price of $165.69, for a total transaction of $3,087,798.84. Following the sale, the executive vice president now directly owns 29,800 shares in the company, valued at $4,937,562. The disclosure for this sale can be found here. 0.22% of the stock is currently owned by insiders.

Shares of McDonald's opened at $165.07 on Friday, MarketBeat reports. The company has a quick ratio of 1.82, a current ratio of 1.74 and a debt-to-equity ratio of -6.54. The firm has a market cap of $128.96 billion, a PE ratio of 23.50, a P/E/G ratio of 2.42 and a beta of 0.63.

McDonald's (NYSE:MCD) last issued its quarterly earnings results on Monday, April 30th. The fast-food giant reported $1.79 earnings per share for the quarter, topping the Zacks’ consensus estimate of $1.67 by $0.12. The company had revenue of $5.14 billion for the quarter, compared to the consensus estimate of $4.97 billion. McDonald's had a net margin of 24.02% and a negative return on equity of 167.80%. The firm’s quarterly revenue was down 9.5% on a year-over-year basis. During the same period in the previous year, the firm earned $1.47 EPS. analysts predict that McDonald's Co. will post 7.67 earnings per share for the current fiscal year.

McDonald's Company Profile

McDonald’s Corporation (McDonald’s) operates and franchises McDonald’s restaurants. The Company’s restaurants serve a locally relevant menu of food and drinks sold at various price points in over 100 countries. The Company’s segments include U.S., International Lead Markets, High Growth Markets, and Foundational Markets and Corporate.

Institutional Ownership by Quarter for McDonald's (NYSE:MCD)

3 Dividend Stocks That Thrive in Both Bull and Bear Markets

When most people think of investing in stocks, all too often the risk of outsized volatility comes to mind. And for better or worse, that volatility — and any given stock’s near-term direction — can be amplified depending on whether we’re in a bull or bear market.

But some businesses are muchless susceptible to the whims of broader market conditions. So we asked three top Motley Fool investors to each pick a stock that thrives inbothbull and bear markets. Read on to learn why they like Anheuser-Busch InBev (NYSE:BUD), McDonald’s (NYSE:MCD), and TJX Companies (NYSE:TJX).

Grey bull and bear figurines with a black and grey background.

Image source: Getty Images.

Raise a glass to this enduring industry

Steve Symington (Anheuser-Busch InBev): If there’s one industry that can survive and thrive through virtually any market conditions, it’s the global brewing industry. And I can’t think of any company that’s better positioned there than Anheuser-Busch InBev.

With the help of its $100 billion plus megamerger with SABMiller completed in late 2016, which itself provides massive cost synergies, the worldwide brewing juggernaut now sells its massive portfolio of roughly 400 beer brands in more than 150 countries. Those beers include seven of the world’s most popular brands, headlined by its three leading “Global Brands” in Budweiser, Corona, and Stella Artois.

Of course, global exposure has its pros and cons. Starting in late 2016, for example, AB InBev’s business in Brazil suffered weakness in the face of economic strife and what management described as a “challenging consumer environment.” And in late 2017, adverse weather held back shipments in the crowded United States market.

But even as AB InBev works to turn around its struggling geographies — shares rallied in March as Brazil began to rebound, for example — those challenges were always balanced by the relative outperformance of AB InBev’s brands in other regions.

If that’s not enough, AB InBev offers a healthy dividend with an annual yield of 4.45% as of this writing, ensuring patient investors continue to get paid regardless of market conditions.

A dividend stock that’s proven its mettle

Jeremy Bowman(McDonald’s):If you’re looking for a dividend stock that will deliver in any market, it’s worth checking the list ofS&P Dividend Aristocrats, the fifty or so stocks that have raised their dividend payouts each year for 25 years or more.

You’ll find McDonald’s high up on that list as the fast-food giant has increased its dividend payment each year since 1976 when it first started sharing profits with investors. As a restaurant operator and franchisor that does business all around the world, McDonald’s has the kind of diversification that dividend investors look for to thrive in any kind of market.

The stock has surged over the last three years, gaining 68%, while riding the bull market and benefiting from new CEO Steve Easterbrook’s initiatives like all-day breakfast, refranchising locations, improving food quality, and remodeling restaurants with its “Experience of the Future” plan. The restaurant sector in general tends to do well in expanding economies as consumer spending increases, and even fast-food chains like Mickey D’s benefit from an increase in spending on “affordable luxuries.”

However, McDonald’s also serves investors nicely as a defensive stock. As a franchisor, its model isn’t so dependent on restaurant-level profits as it makes most of its money on rent and royalties so it will remain profitable even if its franchisees see sales decline. With Dollar Menu items and value meals available at around $5, the company also has plenty of options for consumers looking to tighten their purse strings.

McDonald’s last dividend increase raised the payout by a solid 7.4% to $1.01. With profits quickly increasing due to Easterbrook’s modernization plan, I’d expect another solid hike this fall.

Off-price retailing is a long-term winner

Demitrios Kalogeropoulos (TJX Companies): Very few retailers can survive, much less thrive, through the frequent downturns that plague the industry. But TJX, the company behind the TJ Maxx, Marshalls, and HomeGoods shops, has proven through several recessions that it has what it takes to succeed in a wide range of market conditions.

The off-price retailer’s latest fiscal year included modest sales and earnings growth, with revenue at existing locations rising 2% as profitability held steady at 30% of sales. Unlike many of its peers, customer traffic was positive in 2017, and that success is a testament to TJX’s army of merchandise buyers who are always ready to snap up high quality inventory at distressed prices.

The retailer is expecting to grow sales at a steady 2% rate in 2018. Its stellar cash position, meanwhile, should give management room to double their stock buyback spending to as much as $3 billion. Yet the best news for income investors is that TJX boosted its dividend by a hefty 25% in February. That marks the 22nd consecutive year of dividend raises, meaning this retailer needs just three more hikes before it qualifies for membership in the exclusive Dividend Aristocrat club.

The bottom line

We can’t guarantee that these three stocks will be able to outperform the broader market and continue to thrive in all markets. But between AB InBev’s unrivaled global brewing industry leadership, McDonald’s durable brand and franchise business, and TJX’s history of thriving through recessions, as well as the rock-solid dividends paid by each of these businesses to investors, we like their chances of doing just that.

Apple, McDonald’s, Pfizer and Other Dow Earnings Coming This Week

Most of the Dow Jones industrial index components have reported their latest quarterly reports, and overall the results have been solid. Yet the index is marginally lower than it was two weeks ago.

This week, five of the 30 Dow components are expected to share their results this week. The Dow has been subject to increased volatility since January, and some investors may have looked to the current earnings season to stabilize the index.

24/7 Wall St. has put together a preview of those Dow companies scheduled to report their quarterly results this week. Here, we have included the consensus earnings estimates from Thomson Reuters, as well as the stock price and trading history.

Also see our separate preview of some of the week’s other most anticipated earnings reports, including Alibaba, CVS and Tesla.

Be advised that the earnings and revenue estimates may change ahead of the formal reports, and some companies may change reporting dates as well.

McDonalds Corp. (NYSE: MCD) is set to report its most recent quarterly results first thing Monday morning. Analysts are looking for $1.67 in earnings per share (EPS) and $4.97 billion in revenue. Shares closed the week at $158.30, with a consensus price target of $185.54 and a 52-week trading range of $190.59 to $259.77.

Merck & Co. Inc. (NYSE: MRK) is expected to report its first-quarter results early Tuesday. The analysts consensus forecast is EPS of $1.00 on $10.10 billion in revenue. Shares were changing hands at $59.47 as last week came to a close. The consensus price target is $68.40, and the stock has a 52-week range of $52.83 to $66.41.

Pfizer Inc. (NYSE: PFE) will share its latest quarterly earnings before Tuesdays opening bell as well. The consensus estimates call for $0.75 in EPS and $13.15 billion in revenue. Shares ended last week at $37.00, in a 52-week range of $31.67 to $39.43. The consensus analyst target is $40.11.

Apple Inc. (NASDAQ: AAPL) is scheduled to share its quarterly report late on Tuesday. The consensus estimates are $2.69 in EPS on $60.98 billion in revenue. Shares were last seen at $162.32. The stock has a 52-week range of $142.20 to $183.50, and the consensus price target is $192.94.

And DowDuPont Inc. (NYSE: DWDP) is expected to report its most recent quarterly results before regular trading begins on Thursday. The consensus analyst estimates are $1.10 in EPS and revenue of $21.42 billion. Shares of DowDuPont were at $64.32 on Fridays close. The consensus price target is $82.80, and the 52-week range is $59.29 to $77.08.

ALSO READ: Alibaba, CVS, Tesla and Other Earnings to Watch For This Week

The Economy Isn't As Strong As You Think

The U.S. economy seems to be humming along, with 2017 growth touching 2.3%, well above the 1.5% in the year before. The Bureau of Economic Analysis upgraded its estimate for fourth quarter growth to 2.9% from the advance estimate of 2.6% in January.

The picture on the earnings front is just as rosy. Companies in the S&P 500 reported growth of 11.7% in earnings last year and analysts see that number growing by 18.4% in 2018, according to FactSet Research.

While market volatility has jumped lately on fears of a trade war, solid economic growth, and hope that the tax cuts will drive earnings have supported stocks near highs.

But it seems investors may be looking at the wrong metrics.

Against good numbers at the broadest level, a recent release points to a new front of economic weakness lurking just under the surface.

This factor has an overwhelming effect on the economy and could soon turn investor sentiment. Looking deeper into the data may show the only place for safety in what could become the end of the bull market.

Are Retail Sales Hiding A Disturbing Trend?
Retail sales in the United States fell for the third consecutive month in February, even as consumer confidence hit a 17-year high. According to the Commerce Department, February retail sales fell 0.1% from the previous month, marking the first three-month slide since April 2012.

Weak retail sales could be a big problem for the economy considering 70% of GDP is driven by consumer spending. The Atlanta Fed downgraded its estimate of Q1 GDP growth to 2.3% on April 5, a half-percent reduction from its previous estimate. Contribution from consumer spending in the quarter is seen as 1.3% now versus 1.6% previously, the largest drop among contributing factors.

The picture is not uniformly bleak within retail sales and a trend is developing when you look deeper into the numbers.

Looking at the three-month data, it seems consumers are spending freely on small, impulse items while holding back on the bigger purchases. This could be showing some hesitancy on the part of consumers that other economic data isn’t showing.

In the big-ticket items, notably in Auto and Home Furnishings, there’s a significant change in the year-over-year growth and the more recent growth.

Sales for companies with more expensive products could be about to get worse as inflation shows signs of creeping higher. Higher prices might not be as obvious to consumers in those smaller items but could easily show through in larger-ticket purchases. The result could be fewer sales or lower profit for companies that aren’t able to pass inflation through to the customer.

Rebalancing Your Portfolio For The New Consumer
Among the biggest losers in the retail sales trend have been autos, furniture, and department stores. Rising rates and any broader economic weakness will weigh on car sales and home purchases. Department stores have been facing double jeopardy on the trend away from luxury shopping and an ever-larger slice of spending going online.

Avoiding the worst of this new trend in retail sales could mean rebalancing to companies in that lower-price component of consumer spending. If an economic slowdown were to hit, these smaller-ticket companies may also be relatively safer as consumers cut back further on big purchases.

McDonald’s (NYSE: MCD) may be the epitome of this lower-ticket, impulse spending trend, with its dollar menu and 14,000 U.S. locations. Improvements in technology and service helped the company drive a massive 11% increase in operating profitability last year. A refranchising program and benefits from tax reform should help to continue this success.

Shares pay a 2.6% yield and trade for 24.3 times trailing earnings. That valuation is higher than the 21.7 times average multiple over the last five years, but earnings are expected to jump 14% over the next four quarters to $7.59 per share.

The Michaels Companies (Nasdaq: MIK) owns six brands in the retail arts & crafts space, including the top specialty retailer in North America and the #1 wholesale distributor by market share. The arts & crafts segment should hold up well in any kind of consumer weakness as people look to save money by staying in and spending on inexpensive crafts.

The company is aggressively developing its online presence with three websites for different brands and free shipping on orders of $39 or more. The sites grew traffic from 130 million visitors in 2015 to 250 million in 2016 and continue to account for a larger portion of sales.

Shares trade for just 8.8 times sales, nearly half the average multiple of 16 times over the four years since the public offering. Earnings are expected to grow 5.5% to $2.32 per share this year.

Molson Coors Brewing (NYSE: TAP) is the leading brewer globally with 25% of the U.S. market, a 33% share in Canada and a fifth of the European market. The company acquired the remaining 50% stake in MillerCoors from SABMiller in 2016, giving it greater scale and international distribution.

Competition and shifting consumer tastes to craft beers has weakened volumes, but the company has expanded into the space and now has the largest brands in the United States, Canada, Ireland and Spain by market share.

Benefits from the acquisition of MillerCoors are just recently coming through to financials. While net sales only grew 1.7% in the year to Q2, the company was able to grow earnings before interest, taxes, depreciation and amortization (EBITDA) by 5.5% over the period. Free cash flow has tripled compared to the first half of 2016.

Shares pay a 2.2% yield and trade for 16.7 times earnings versus an average of 25.9 times over the last five years. Earnings are expected to increase 18% to $5.38 per share over the next four quarters.

Risks To Consider: While macro factors like retail sales point to support in shares of companies in smaller-ticket items, watch out for stretched valuations in many names after nearly a decade in rising share prices.

Action To Take: Follow consumers by investing in consumer discretionary companies that make their money on smaller-ticket products rather than larger purchases.

Editor’s Note: With reports of deteriorating production, performance, and revenue… this high-profile CEO is ditching his auto empire. Now he’s set his sights on an even more lucrative business. And if you jump in at the ground level of this opportunity you can ride it upward to sky-high profits. Grab a piece of this $1.3 trillion industry in the making today.