Performance is relative. If a stock manages to move sideways or modestly rise when most stocks are plunging, then investors should be pleased. Better yet, these are precisely the kinds of stocks that tend to outperform when most other stocks simply stabilize. We're not there yet, but we're getting awfully close. So it pays to take a close look at the companies showing impressive
relative strength to find clues as to where to focus your investing dollars. And even though the past few sessions have been up, the
market need not rally for these S&P 500 stocks to move ahead.
One way to buck the tide: find a buyer. Google (Nasdaq: GOOG) offered a $12. 5 billion dowry for Motorola Holdings (Nasdaq: MMI) in July, helping that stock to rise 60% in the past three months. It also helps to offer a fat dividend to entice investors. Utilities and tobacco stocks held up very well in the third quarter, thanks to their hefty payouts.
But it's unwise to expect further appreciation for these stocks. In most instances, their dividend yields are simply too small to entice high-yield investors. And in a more stable market, the unwinding of the "flight to quality" trades may cause these stocks to lose some appeal, especially if investors move back farther out on the risk curve.
But there are a dozen other stocks that have managed to rise in an otherwise tough market. Which of these are poised for further gains as the market stabilizes?
To expect continued gains for gold producer Newmont Mining (NYSE: NEM), which at one point was up more than 30% in the quarter, you have to have a very bullish outlook for gold prices. Why has Newmont done far better than its peer group? Because it announced plans in July to make major investments in Peruvian and Australian mines that should set the stage for 7 million ounces in annual gold production by 2017.