Seven trading days into 2009 the stock market has returned to the bad old ways of 2008. At least for investors on the long side. As we wait for earnings season to get into gear and see if our favorite stocks can buck the trend and show positive earnings, I thought it would be interesting to find some stocks that have rewarded their shareholders handsomely early in this new year. So I ran a little stock screen to find the best performing stocks so far in 2009.

Screen criteria:
YTD return: >40%,
Stock price: >$5.00,
market cap: >$100 million
and listed on an exchange.

I figured these criteria would produce stocks that an average investor had some chance of owning.

The year is young and the screen came up with 12 companies. The companies are in a diverse list of sectors, but the pharma and medical devices were well represented. These industries scare me with their tremendously fluctuating prospects based on the FDA approval of new products. The same sectors are also a prime ground for merger activity. Put the two together and investors can be very well rewarded when their stock holding is involved in a merger.

Four of the 12 companies on the list are somewhere in the merger/buy out process. Tops on the list is Advanced Medical Optics, Inc. (NYSE:EYE) which gained 142% yesterday when Abbot Labs (NYSE:ABT) announced their purchase of the company. EYE stock is up 225% from the start of 2009. The other companies of the 12 with merger prospects are CRXL +49%, SWIM +45% and IDEV +73%. Further upside for these companies may be limited because most of the merger premium is priced into the stock.

Two sectors come in with a pair of companies on the list. Shipping stocks are represented by Dryships, Inc. (NASD:DRY) +43% and OSG America L.P. (NYSE:OSP) +44%. I believe shipping companies have tremendous upside when the world economy starts to improve. Tech companies on the list are NetScout Systems, Inc. (NASD:NTCT) +56% and PALM +92%. Palm has been a recent hit with the introduction of a new smart phone.

Medical devices without merger activity give us one additional company: ArthroCare Corp. (NASD:ARTC) +71%. This may be a dead cat bounce as ARTC had an accounting scandal in December and the stock lost most if its value. NASDAQ wants to delist it and the company has another month to get its books in order.

The energy sector has a single stock in our happy dozen. DCP Midstream Partners LP, (NYSE:DPM) +49%. Many energy MLPs have done well over the last few weeks. Those that can maintain their distribution rate through the next couple of quarters will reward investors very well.

Finally, we are left with a couple of niche firms that have performed very well so far this year. ICT Group, Inc. (NASD:ICTG) +54% is an outsourcing company that could benefit from employee reductions at major corporations. American Capital, Ltd. (NASD:ACAS) +58% is a private equity and financing firm. Scary stuff!