Nvidia Corp. is the best performing stock among the 500 stocks in the Standard & Poor's 500 Index this year. In the 43 weeks through October 28 this up-and-coming technology firm has risen 114 percent.
Not far behind, at 97 percent, is Newmont Mining Corp., the largest U.S. gold miner. Then comes a pair of natural gas distributors, ONEOK Inc. at 95 percent and Spectra Energy Corp. at 76 percent.
Rounding out the top five, Freeport-McMoRan Inc., a copper miner, is up 61 percent.
Leaders like this are interesting, both in themselves and for what they tell us about investors' appetites at a given time. Let's have a look at these five stocks that are currently topping the charts.
I have never owned Nvidia (NVDA) shares, but my wife, who is an analyst and portfolio manager at my firm, does. So far, she hasn't teased me about her success with the stock. At least not too much.
Based in Santa Clara, California, in the heart of Silicon Valley, Nvidia makes specialized processing chips used in gaming, in smartphones and in cars. It also provides platforms for gaming, computerized design and other purposes.
Now that Nvidia has more than doubled in less than a year, my wife faces a difficult decision. Should she take profits?
Since the stock now fetches 46 times recent earnings, eight times book value (corporate net worth per share) and almost seven times revenue, I think it would be wise. But then, I'm such a cheapskate that I wouldn't have bought the shares in the first place.
Gold stocks tend to do well when inflation is high and rising, and when there is international turmoil. Currently inflation is low in the U.S., Japan and Europe, but I think it will rise in the next 18 months.
As for international tension, we are likely to have quite a bit, as the new U.S. president (be it Clinton or Trump) is tested by Russia, China, terrorists or adversaries in the Middle East.
Therefore, I wouldn't be surprised to see Newmont Mining (NEM) tack on some additional gains in the next 12 months.
Oneok Inc. (OKE), based in Tulsa, Oklahoma, operates natural gas pipelines, and does natural gas gathering and processing. Its big percentage gain so far this year reflects the natural gas industry's recovery from terrible times last year.
I expect continued improvement for the industry, but I would not buy Oneok shares. The company's debt is higher than I like, and several of its stock valuation ratios are already up there — 26 times next year's expected earnings, for example.
It's a similar story with Spectra Energy Corp. (SE), out of Houston. Its business lines are mostly the same as Oneok's and the reasons for the stock's strength are similar. It sells for 31 times next year's estimated earnings. If I owned either stock, I'd take some profits.
I have owned Freeport-McMoRan (FCX) shares two or three times in my career, and my timing has already been bad. Known primarily for mining copper (67 percent of 2015 revenue), Freeport-McMoRan also produces oil and gas (11 percent), gold (10 percent), molybdenum (5 percent) and other materials (7 percent).
Copper's price tends to swing strongly with the tides of the worldwide economy. Since economies have been slow in Europe and Japan, slowing in China, and growing but not exactly robust in the U.S., copper has been in the doldrums and so has Freeport-McMoRan.
The stock, which was above $50 in parts of 2007, 2008, 2010 and 2011, is now below $11. Even though it has gained 61 percent from its ten-year low at the start of this year, I think there is room for further gains. I like it for investors with a time horizon of more than one year.
I wrote columns similar to this one in 2012, 2014 and 2015. Five stocks were reviewed in each, for a total of 15 stocks. I said to avoid 13 of them, was neutral on one, and recommended one — Southwest Airlines Co. in October 2014.
Southwest (LUV) obligingly rose 28 percent. But to my chagrin, the 13 stocks I said to avoid rose by the same percentage. Meanwhile, the S&P 500 Index averaged 12 percent for the same three periods. Figures are 12-month total returns including dividends.
I may be subtly prejudiced against stocks that have rocketed up. And I certainly am skeptical of stocks that look expensive. A year ago, I said that Netflix Inc. (NFLX) and Amazon.com Inc. (AMZN) were too pricey. Yet both did well in 2016.
John Dorfman is chairman of Dorfman Value Investments in Boston and a syndicated columnist. He can be reached at firstname.lastname@example.org. His firm or clients may own or trade securities mentioned in this column. This column contains general advice, which should be adapted to an investor's own situation, preferably with the help of a trusted advisor.