Ten Stocks with Gains for the Ages

When 2008 ended with a -37.0% loss in the S&P 500, investors didn’t have a lot of good news to share.

But 2009, happily, proved to be a comeback year, with the benchmark index gaining +23.5% and many stocks gaining much more than that. The highlights of the year that closed the millennium’s first decade are a guy named Madoff, the $787 billion stimulus package and a rebound off the worst lows many of us are likely to see in a lifetime.

Amid the tumult, these ten companies inked remarkable gains. Here’s a look at what they did right, what’s next, and if these companies belong in your portfolio in the New Year:

Tenet Health Care (NYSE: THC) – 2009 Performance +368.7% (2008: -77.4%)

What Went Right: Hospital operator Tenet managed a decent turnaround with two strong quarters, which was good enough news to allow its shares to pick up some lost ground after the company was caught in the credit crunch. Tenet began to pick up ground with the rest of the sector as the health-care bill took shape. Hospitals, for their part, eat a tremendous amount of losses when uninsured patients stiff them for treatment, and any steps to bolster Americans’ health coverage is likely to add directly to their bottom lines.

What’s Next: The health care bill has passed the House and the Senate and the differences still need to be ironed out.

Verdict: Tenet made it through a rough patch and deserves some applause for its performance, but its shares are fairly valued. Investors who buy these shares now are likely to be disappointed.

Apple (Nasdaq: AAPL) – 2009 Performance: +126.0% (2008: -56.9%)

What Went Right: Everything. The year started with concerns about CEO Steve Jobs’ health. He took a medical leave and announced after the fact that he’d had a successful liver transplant. His absence didn’t seem to hurt anything: Mac sales totaled $13.8 billion in the fiscal year ended Oct. 31, with iPod sales totaling $8.1 billion and the iPhone bringing in $6.8 billion. Apple sold $4.0 billion worth of music and $2.4 billion worth of software — or, as they are called these days, “apps.”

What’s Next: The tech community expects a new product. Apple has secured an event space in Australia suitable for a product launch and has bought the domain name iSlate.com. Amid rampant rumors, the notoriously secretive company isn’t saying a word. Shares are near an all-time high.

Verdict: Apple is expected to earn $7.91 a share in its 2010 fiscal year, though analysts always underestimate. At its current level of valuation, shares likely have somewhere in the neighborhood of +25% upside, though a new product would render those forecasts moot. All in all, Apple is likely to continue to grow its user base with its elegant must-have gadgets and continue to command a heady valuation. It’s a buy.

Ford Motor Co. (NYSE: F) – 2009 Performance: +335.4% (2008: -66.0%)

What Went Right: In Ford’s case, the question isn’t so much what went right as it is what didn’t go wrong. As General Motors and Chrysler failed and even Toyota foundered, Ford hung in. It had already begun to focus on its core business, offloading the nonessential brands like Aston-Martin, Volvo, Jaguar and Land Rover that it bought during the Jacques Nasser era.

Ford posted some losses but it didn’t take a dime from the feds and was never anywhere near bankruptcy court. Shareholders who bought while investors ran for the exits did extremely well: It was possible to earn a +500% return with these shares in 2009.

What’s Next: Ford’s highly excellent CEO Alan Mullaly is presiding over an automaker that’s building cars people can afford and want to drive. It’s also on track to deliver cutting-edge lithium-in battery technology to help electric cars transition into the mainstream. Any market share that it’s picked up could be short lived: GM is coming back stronger than ever, and Toyota, though weaker than in years past, remains a tough competitor with a very loyal customer base.

Verdict: Ford was profitable overall for the first three quarters of 2009 and is expected to earn less than $0.60 per share in 2010. Given its historical valuation, whatever rosy future is in store is already priced in, as shares jumped above $10 for the first time since 2005. Investors should look elsewhere.

Freeport McMoRan Copper & Gold (NYSE: FCX) – 2009 Performance: +231.3% (2008: -76.1%)

What Went Right: The prospect of absolute financial annihilation is always good news for hard assets like gold, the price of which started the year under $900, dipped to about $875 in April and has climbed steadily since, closing the year and the decade at $1096, up 23% for the year. That’s great news for major gold producers like Freeport, which also saw the value of copper surge.

What’s Next: The market inked some nice gains this year, and investors who were burned in 2008 will likely be ready to inch back into the market and away from safe havens like gold. That will depress prices and mean tighter margins for companies like FCX.

: Gold is a cautious investment, and caution is falling out of vogue. Investors likely will be safer in cash than in the yellow metal over the course of 2010.

Whole Foods (Nasdaq: WFMI) – 2009 Performance: +192.1% (2008: -76.9%)

What Went Right: Consumers came back from 2008’s spending lockdown, which was brought on by high gas prices in late 2007 and exacerbated by falling home prices and the market collapse in 2008. But the upscale grocer’s loyal customers decided that they couldn’t live without its organic produce and other high-quality foods, especially if they were eating in more. The company received $400 million in private equity funding that allowed it to continue its expansion during the downturn, and it also shed of some antitrust issues that lingered after its acquisition of Wild Oats market.

What’s Next: Whole Foods was one of my picks going into 2009. I called it a buy at about ten bucks and was pleased to see the shares rebound. At 32.5 times earnings, however, these shares have almost the same valuation as Apple without the future upside.

Verdict: If you like Whole Foods, shop there. I do. But look elsewhere for investments. There’s no upside here.

Amazon (Nasdaq: AMZN) – 2009 Performance +162.3% (2008: -44.6%)

What Went Right: Amazon had a great Christmas, not in 2009 but in 2008, which was some trick in one of the worst shopping seasons in recent memory. This year, the site was getting hundreds of orders per second, and the company will continue to capitalize on its leading position as the nation’s online mall. Its Kindle reader has started a revolution that, for now, the company owns. The shares rose all year.

What’s Next: Amazon is going to release numbers that Wall Street likes, but then it’s likely that some of the fizz will fade as investors question whether the shares are worth nearly 80 times earnings

Verdict: I like Amazon, but given its current valuation, it’s nowhere near my radar screen by any stretch of the imagination. Still, patient investors should keep some cash at the ready to take advantage of the inevitable pullback.

American Express (NYSE: AXP) – 2009 Performance +118.4% (2008: -64.3%)

What Went Right: American Express fired cardholders in 2009 that had no business leaving home without it. The cardmaker had lowered its standards somewhat to grow its membership base, and when the economy tightened and cardholders felt the economic squeeze, many of them fell behind on their AmEx bill. The company has since worked to focus on its best customers and rebuild itself as a premium brand. The worst thing that happened to the company this year might be its association with Tiger Woods, and that’s hardly keeping the CEO up at night.

What’s Next: AmEx will keep its standards high and continue to bring in the best customers. And if a new pitchman signs on, no one should be too surprised.

Verdict: At 33.5 times earnings, AXP is probably a little overvalued. It’s a good comeback story for an American icon, but there is a lot more upside out there than these shares.

Goldman Sachs (NYSE: GS) – 2009 Performance +100.1% (2008: -60.8%)

What Went Right: The storied investment bank sold preferred shares to billionaire investor Warren Buffett’s Berkshire Hathaway and was among the first to get shed of government oversight by paying back its TARP funds. Goldman made a fortune trading this year and in underwriting stock issues and has so far reported three exceptional quarters for 2009 totaling $7.4 billion in profits.

What’s Next: Goldman never stops trading, underwriting or financing deals, and it’s likely to see a continued rebound in 2010 as a rich business opportunity.

Verdict: Goldman is on track to earn $18.75 per share in 2010, which implies a lot of upside for these shares. One potential catalyst is a share split, which doesn’t change any of the underlying fundamentals but can make the shares — which trade for $169 — “seem” more affordable. These shares are a solid choice for 2010.

Google (Nasdaq: GOOG) – 2009 Performance +101.5% (2008: -55.1%)

What Went Right: Google continued to show that it’s one of the smartest companies out there, notably in February when it posted its first message on Twitter — in binary code. The company released Google Voice in March, an application that has the possibility to completely change the way people use their phone, which may be one reason that it’s not available on the iPhone, which runs exclusively on AT&T’s network. The company continued to benefit from advertisers who like targeting consumers and being able to measure results.

What’s Next: The catchword here is innovation. That’s why investors are willing to pay 40 times earnings — not because of what Google has done, which is game-changing, but because of what it will do next.

Verdict: Every growth-oriented portfolio should hold these exciting shares.

Diamond Offshore (NYSE: DO) – 2009 Performance +67.0% (2008: -58.5%)

What Went Right: The market was wrong about oil. Admittedly, it looked a little bleak going into the year. No one thought the economy was going to do anything but contract, which meant weaker demand for crude. Prices opened the year in the $40s and stayed there through the first quarter before beginning to rebound in about May. They closed the year just shy of $80 a barrel. That’s great news for companies like Diamond Offshore, which explore for petroleum in deep-sea wells, which brought the industry some big finds in 2009, news that clearly points to the sea as a bright spot in the industry’s future.

What’s Next: A continuing rebound means higher and higher prices for crude, and you don’t have to look very far to find an economist who’s forecasting triple-digit prices in the near-term future. The higher crude’s price, the more cost-effective expensive offshore drilling becomes. That’s not great news at the pump, but it’s outstanding news for drillers like Diamond Offshore.

Verdict: DO had a great year, but it’s still trading for less than ten times earnings. It’s a suitable investment for risk-tolerant investors willing to bet that oil will continue to hold its recent gains or continue its uptrend.

P.S. It’s a little ironic. When my boss Paul Tracy released his investment predictions for 2009 last year, his critics blasted him for his “absurdity.” But his “wildest” predictions — the ones claimed to be the most “out there” and “impossible to forecast” — ended up making his readers the most money (up to +332.4%!). To see how ALL of last year’s predictions fared compared to the overall market — and to get a sneak preview of his 11 brand new forecasts for 2010, simply click here.

P.P.S. One of these new 2010 picks could earn you +1,300% in a surprise takeover. Click here for more info.