The markets have been off to a great start in 2013, with the S&P 500 (INDEXSP:.INX) gaining close to 12% in the first three months of the calendar year. Who would have thought that this was possible as 2012 drew to a close, with last minute wrangling over the fiscal cliff deal and the sticky situation in Europe? However, the stock market has rallied strongly, and those who had their money invested in the right stocks must be sitting on a pile of profit.
I was one of those many bloggers who picked stocks for the New Year, in an effort to guide readers to the best possible ways of utilizing their hard-earned dollars by investing in the right stocks. With one quarter of the calendar year and an earnings season in the rearview mirror, I think it’s the right time to see how my picks performed during the period.
| Company | Expectation | 1Q Returns |
|---|---|---|
| Micron Technology (NASDAQ:MU) | Will Appreciate | 62.71% |
| Ciena | Will Appreciate | 4.44% |
| Cree (NASDAQ:CREE) | Will Appreciate | 64.79% |
| Giant Interactive (NYSE:GA) | Will Appreciate | 20.82% |
| Finisar | Will Appreciate | -16% |
| JDS Uniphase | Will Appreciate | 1.56% |
| Family Dollar Stores | Won’t Appreciate | -5.82% |
| ADTRAN | Won’t Appreciate | 1.55% |
| Xilinx | Will Appreciate | 8.09% |
Stock price data (from Dec. 31, 2012 to March, 28, 2013) taken from Google Finance
Thus, I was mostly on the spot with my picks, with the likes of Micron Technology, Inc. (NASDAQ:MU) and Cree outperforming my own expectations. But the relevant question now is — where are these stocks headed from here? I will look at the top three performing picks of mine in this post, and see if they can sustain their momentum, while the rest of the stocks will be covered in a later post.
Micron is poised to spike
Towards the end of 2012, I had advised investors to hang on to their long positions in Micron, and what a terrific recommendation it turned out to be. Micron’s ascent began as signs of a rebound in the pricing of NAND and DRAM chips started appearing. The company’s latest quarterly report established the fact that it is indeed witnessing an improvement in the average selling prices of its memory chips. What’s more, the company is expecting a solid demand environment to complement improved pricing.
Micron Technology, Inc. (NASDAQ:MU) expects its mobile DRAM business to grow further, driven by the presence of two heavyweight smartphone makers on its client list, according to its President, Mark Adams. Ever increasing sales of mobile devices are expected to push demand for NAND flash higher. Moreover, Micron’s solid-state drive (SSD) business is expected to continue growing after jumping 40% in the previous quarter.
In addition, DRAM shipments for networking got off to a strong start. With the expected increase in telecom spending, led by the likes of AT&T Inc. (NYSE:T), Micron Technology, Inc. (NASDAQ:MU) is expecting is expecting its DRAM bit shipments to the networking sector improve further. Also, once Micron completes the acquisition of Elpida, it would have a better command over the DRAM and mobile DRAM market. All in all, things seem to be looking up for Micron and I don’t see any reason why it shouldn’t continue its ascent.
Cree lights up once again
Light-emitting diode (LED) maker Cree is one stock which has defied gravity in the true sense of the word. The stock had met with downgrades toward the end of last year, analysts were citing a high trailing P/E and growing competition as the reasons why Cree shares could drop. But I was pretty sure that the company would continue its trailblazing run in 2013, and it has done so quite handsomely as evident from the chart above.
Going forward, I don’t expect Cree to slow down. The company has successfully negotiated the threat of bigger peers such as Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) and General Electric Company (NYSE:GE) so far as it is a pure-play LED company. Its focus on delivering great products at low cost has seen it win a number of lighting contracts across the globe. Moreover, the rapid growth in the LED lighting industry makes Cree a growth stock which investors should consider despite a high P/E ratio.
Cree shares received another boost last month after the company bumped up its guidance and introduced “game-changing” replacement bulbs which would spur adoption of LEDs. Its 40-watt replacement bulb for $9.97 could go a long way in driving its top line higher as it consumes 84% less energy and lasts 25 times longer. The company is set to report its next quarterly results later this month, and I won’t be surprised if its streak of solid performances continues.
Game on with this Giant
Chinese online gaming company Giant Interactive is one pick of mine of which I’m really proud. I’ve followed the company for almost a year now, and find it to be the best bet to ride the growth of online gaming in China. This is why I had expected it to turn in a giant performance this year, and it hasn’t disappointed me at all.
Giant has been growing its revenue and earnings at a fantastic pace, driven by the success of its games. The company has witnessed solid and consistent growth in its active paying accounts and average revenue per user, with both metrics improving 6.1% and 7.4% in the previous quarter, respectively. Giant has constantly improved its games and developed interesting new ones which have done well.
Its wide portfolio of games, coupled with growth across different platforms, including web games, micro-client games, and mobile, position it well to benefit from the proliferation of gaming in all forms. The company always has at least one great game in its portfolio to drive growth. While the ZT Online franchise has helped it rake in solid revenue quarter after quarter, new games such as World of Xianxia are expected to lift the top line to new highs.
The best part about Giant is that the company still trades at a cheap trailing P/E of 10 even after appreciating close to 25% so far this year. With more growth in the offing, Giant investors can expect the stock to rise further.
Final thoughts
These three stocks have done really well in the first quarter of 2013, and the strength of their businesses can take them even higher. While improved pricing trends and solid demand are tailwinds for Micron Technology, Inc. (NASDAQ:MU), rapid adoption and innovation should do the trick for Cree, and Giant’s addictive games and growth across different platforms can propel it to new highs.
As mentioned earlier, I focused on my best picks in this post. But we shouldn’t forget the laggards either, as they can always turn into leaders. Check back again in a few days to see if the laggards in my list can transform into leaders.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Giant Interactive Group.
