A select group of stocks in the S&P 500 have managed to defy gravity this year, delivering stellar returns while avoiding the index’s recent pullback. Led by the likes of Meta Platforms, Palo Alto Networks and Eli Lilly, these stocks have gained 50% or more in 2022 so far, with zero decline since the S&P 500’s peak on July 31.
The S&P 500 has fallen 5.6% since reaching an all-time high on July 31, as rising Treasury yields spooked investors. But 9 stocks within the index held their ground or even advanced, showcasing their resilience. On average, these stocks have surged 73% year-to-date, dwarfing the S&P 500’s 13% gain.
Why These Stocks Outperformed
According to Nicholas Colas of DataTrek Research, the S&P 500’s breakdown was caused primarily by the 10-year Treasury yield rising above 4%, rather than negative revisions to earnings estimates. This indicates investors grew wary of stocks as “risk-free” yields became more attractive.
The 9 stocks that continued rallying despite the pressure are perceived as higher quality and better positioned for a rising rate environment. For example, Meta Platforms and Palo Alto Networks have refocused on their core social media and cybersecurity offerings, boosting efficiency. With interest rates set to climb further amid high inflation, investors favor companies with proven business models that can deliver earnings growth.
Dividend yields also played a role, as non-dividend payers like Meta and Palo Alto Networks held up better than dividend payers. With Treasury yields approaching 5%, dividends became less attractive, causing stocks dependent on dividends to lag. Healthcare leader Eli Lilly was an exception, gaining over 25% during the pullback due to robust demand for its neurological and weight-loss treatments.
Standout Performers of 2022
Here are the 9 S&P 500 stocks delivering the best of both worlds in 2022 — substantial gains without enduring the index’s recent pains:
- Meta Platforms (META) — The Facebook and Instagram parent is up 167.5% this year, reversing last year’s crash. Meta gained 1% since July 31.
- Palo Alto Networks (PANW) — The cybersecurity firm has surged 84% in 2022 and edged up 2.7% during the S&P 500’s dip.
- Eli Lilly (LLY) — Shares of the pharma giant are up 58.4% year-to-date and spiked 27.4% since July 31.
- Alphabet (GOOGL) — Google’s parent company has climbed 56.5% in 2022 and 4% since July 31.
- Cadence Design Systems (CDNS) — The software developer has gained 55.5% this year and advanced 6.7% during the pullback.
- Synopsys (SNPS) — The electronic design automation company has increased 53.5% year-to-date and 8.5% since July 31.
- Booking Holdings (BKNG) — The travel leader has booked gains of 51.9% in 2022 and edged up 3% since July 31.
- West Pharmaceutical Services (WST) — The healthcare packaging company has expanded 64.6% this year and ticked up 5.2% during the dip.
- Arista Networks (ANET) — The cloud networking firm has soared 60.5% in 2022 and spiked 25.6% since July 31.
While past performance doesn’t guarantee future returns, these stocks have proven resilient during periods of market turbulence. Their businesses are aligned with long-term trends and less vulnerable to rising rates. However, risks remain, and investors should conduct thorough research before buying any stock.
- A select group of S&P 500 stocks have gained 50% or more this year while avoiding declines since the index’s July 31 peak.
- Stocks like Meta, Palo Alto Networks and Eli Lilly held up as rising Treasury yields pressured markets.
- These companies operate efficiently and have less reliance on dividends, making them appealing in a higher rate environment
- On average, the 9 stocks gained 73% year-to-date, compared to 13% for the S&P 500 overall.
- However, economic uncertainties persist, underscoring the need for diligent research when investing.
While the broader index struggled, these stocks delivered outsized returns without the pain. Savvy investors may want to analyze if similar dynamics could drive continued outperformance. But chasing performance comes with risks. Maintaining proper portfolio diversification and weighing valuations is key.
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