Surprises Among the Leaders

 | Apr 17, 2014 | 1:12 PM EDT
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Oils, utilities and a smattering of special situations. That's what has managed to climb the wall of worry to get to the S&P 500's 52-week high list.

I find this list pretty shocking. Consider that of the 28 new highs, 13 are utilities in some fashion. That's directly related to both the collapse in bond yields but also a belief that Federal Reserve Chair Janet Yellen is right and that this economy is not going anywhere soon.

You can't possibly make an earnings case for Wisconsin Energy (WEC) or Northeast Utilities (NU) or American Electric Power (AEP) or any of the others for that matter. You can make a consistent dividend case, though. These are all time-tested bond-market equivalents that reflect people reaching for yield.

When I say reach, I mean reach, because people are willing to buy Frontier Communications (FTR) and Windstream Holdings (WIN), two stuttering telecoms that are often talked about as problematic when it comes to those payouts.  

Spectra Energy (SP) has become popular, too. This is a natural gas distribution play with a fine yield that doesn't need to do massive equity financings. It's a quiet winner like so many others on the list.

Oh, and there's Vornado (VNO), a growth real estate investment trust that yields almost 3%. This one has been left for dead at various times, and that is ridiculous, because the canny Steve Roth runs it. I would buy it on any weakness, because it has a solid combination of office and retail properties, especially in the rent-rising areas of New York City.

Some of the others are eye-opening, however. Let's take Allergan (AGN). The story of Allergan is a cautionary one -- for all of those who are dumping Gilead (GILD) and Celgene (CELG), that is. In the tumultuous decline from the $120s to the $80s, one after another analyst turned on the Allergan, saying that it had around-the-corner generic competition for a key eye drug, Latisse. It was incredible; no matter what the company did, it couldn't stop the rumor-mongering about the generic competition. It got so ugly that the CEO, David Pyott, whom I have come to know and like very much, came on "Mad Money" when the stock was in the $80s and said that the patent challenge simply wouldn't hold up and that we would soon be hearing from Allergan about new formulations that couldn't be replicated anyway.

When it finally filtered out that the challenge would fail, the stock simply never looked back. But boy, was it painful while it was happening.

How about Snap-On (SNA), which is on tonight? This is a company that has a remarkable, unique franchise that provides the best tools to professional mechanics. It is always inventing new tools -- I call it a "stealth technologist" in Get Rich Carefully. There's no competition.

Southwestern (SWN) and Range Resources (RRC) are pure-play natural gas companies that keep finding more gas and are low-cost producers. They are part and parcel with the energy revolution, but they are also rallying under the false hope that they will provide natural gas to nat-gas-starved places. They are strictly local, and Cheniere (LNG), the first plant to export, won't be ready for several years. I know from my colleague Matt Horween that Chesapeake Energy (CHK) is breaking out, too. The group can't be kept down.

After utilities. it is the oil-service business that predominates notably: Schlumberger (SLB), Baker Hughes (BHI), Helmerich & Payne (HP) and Halliburton. (If my fave, Core Laboratories (CLB), were in the S&P 500 you'd see that, too.) Now when you go listen to the commentary of, say, Baker Hughes, it's pretty obvious what is happening: the North American energy revolution. Baker Hughes on its conference call called out the Permian as one of the fastest-growing areas around the world, verifying, again, that Pioneer Natural Resources (PXD) and EOG Resources (EOG) need to be owned.

The rest are pretty darned eclectic, like Allergan and Snap-On. For example, in a real irony, AutoNation (AN) is on the list. Lots of people credit the beginning of the selloff that we've experienced with comments CEO Michael Jackson gave to Squawk Box about how business has fallen off a cliff and that the car companies were dreaming if they thought they could make their numbers.

Well, guess what? The weather got good, and those inventories cleaned up real fast, and now it's on the 52-week high list, no doubt on the backs of short-sellers who listened to Jackson on television. Oh well, at least he told you on the call that things had gotten better.

One of my absolute favorite companies is and always has been Kimberly-Clark (KMB). The company is never satisfied, always trying to boost the dividend or restructure, and it is willing to sacrifice sales on the altar of profit margins as it did when it ceded the Western Europe diaper market to Procter & Gamble (PG) not that long ago. This company is spinning off its healthcare division, and that has caused me to re-recommend it with a fervor to fill the void of analysts who don't care for it. I think it can inch up to $120 over time, but the dividend protection up there will be meager. No matter, the pieces of the company are worth more than the whole.

I have always like Ball (BLL) ever since it got rid of the Ball jar business and became much more of a high-tech company, particularly in aerospace. It maintains a can business that I think, if spun off, would send the stock much higher. Perhaps that's why it is running?

Boy, here's a wild one. Archer Daniels Midland (ADM), the grain processor that hasn't done anything in years. It seems to have finally figured out how to make a lot of money off the U.S. industrial agricultural machine.

Then there's Alcoa (AA). You know that I have championed this one for ages, and this last quarter, despite how it was characterized by the media, was indeed the breakout on the top and bottom lines. The tough actions have been taken, the expensive plants closed, and the value-added portion of the business is doing incredibly well, led by aerospace, trucking and autos, the latter all about light-weighting, something CEO Klaus Kleinfeld told you about when the stock was in the single digits not that long ago. I see this one going to $18 over time.

Best for last: Remember that article a couple of weeks ago that talked about how Warren Buffett's stock-picking has become subpar? Funny thing, but there's Berkshire Hathaway (BRK.B) standing tall on the list, and while that may not necessarily relate to his portfolio, it doesn't hurt that he has huge positions in Wells Fargo (WFC) and Coca-Cola (KO), two stars of the reporting period. I think he will be patient on IBM (IBM), as he has been for others, and you need to buy it ahead of the new product introductions.

Think about it: no financials and no real tech. Just yielders and oil and gas and a smattering of special situations.

No wonder this market's so tough. I don't see a favorite among them. In fact, it is a list that's been scorned, not loved.

Love can't buy you money, that's for certain at least when it comes to stocks. 

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