Inside the Numbers: 5 Stocks That Are Up in this Downturn

It’s rough out there. The market had another wild ride Wednesday, with the Dow Jones Industrial Average posting nice gains in the 50- to 60-point range for most of the day before falling off in late-day trading to close down 69 points, below the psychologically important 10,000 mark.

It takes a decline of -10% for a market skid to be classified as a “correction.” It seems we’ve already reached that territory. The S&P 500 Index is down -12% since April 23, having posted losses in 14 out of 23 trading days.

With the major averages dropping like stones and investors seeing a sea of red on their computer screens, it’s tempting to think there aren’t any winning stocks out there right now. But that thinking would be wrong. There are always winners in the market — it’s just a little harder to find them in a market like this.

Correction: a lot harder.

#-ad_banner-#Out of all 21,000 actively-traded equities on U.S. exchanges, a little over 1,500 stocks are up since the market began to fall through Wednesday’s close. That’s only 7% of all stocks that are up, in case you were wondering.

But as the saying goes, there’s always a bull market somewhere.

If there’s anything we’ve learned in the past two years since the onset of the financial crisis, it’s that the market can turn south in a big way at any time. So, in order to be prepared for another gap down, the StreetAuthority staff set out to find which stocks held strong in this most recent sell-off. Perhaps some patterns could be determined that could give us clues to surviving the next time around.

Our methods: We screened for stocks trading on U.S. exchanges with a market capitalization of more than $250 million that have been higher since April 23rd. Our result: 233 stocks. Slim pickings, but it just might do.

Here are the top-20 winners:

Notice any similarities? We did too.

Here is a breakdown of the top five sectors in our results:

Health Care: 36
Information Technology: 36
Consumer Discretionary:  36
Materials: 25
Telecommunications: 9

Now it might be one thing to see a random name here an there, but when I see no fewer than four sectors with at least 25 names in our results, I see a pattern. A few observations:

  • The winning streak in health care is obvious. Investors seem to be flocking to defensive, low-beta sectors to escape the rancorous volatility we’ve seen the past month.
  • The number of IT names on this list is surprising, especially considering the tech-heavy Nasdaq is down about -13%. But not when you consider their size. A lot of these companies have small market caps. Because of their size, these companies don’t do a lot of business in Europe. Larger tech names that derive a significant portion of revenue from Europe like Hewlett-Packard (NYSE: HP) and IBM (NYSE: IBM) have suffered.
  • Consumer discretionary stocks are dong well across the board, thanks to encouraging signs in consumer confidence and, most recently, durable goods orders. Interesting fact: 10 out of the 36 names here are in the media sector. Ad spending is ramping up, so keep these names on your radar.
  • 18 out of 25 stocks in the materials group are classified as “metals/mining” stocks. With the European debt crisis looming and the euro’s future uncertain, gold has enjoyed a surge of interest among investors, piercing $1,240 per ounce recently. But as I said recently, gold has been in the midst a 10-year renaissance. The situation in Europe only enhances what has and will be a good place to park some cash for the foreseeable future.

Now, we’ll take a look at five specific stocks that are up and see if they can continue their winning ways.

Coinstar (Nasdaq: CSTR)
is one name that has delivered impressive results in the short-term, but I’d stay away if looking for a long-term, buy-and-hold investment. Coinstar’s kiosk DVD rental business has been disruptive to video rental chains, but the ultimate disruptive force, the Internet, will eventually render this a moot point.

Chip-maker Cirrus Logic (Nasdaq: CRUS) has gained nearly +39% through Wednesday’s close after recently posting impressive results. The chip sector as a whole looks promising, although a stock like Applied Materials (Nasdaq: AMAT) may hold more promise.

You may know iRobot (Nasdaq: IRBT) for the company’s Roomba robotic vacuum, but there’s more to the company than that. This company makes robots of all shapes and sizes. As David Sterman noted in a recent “Winners” article, investors may shy away from its high price-to-earnings ratio (P/E), but I think it may be warranted. The stock still has bright days ahead as government sales account for about 46% of total revenue, and should have room to grow in the long-run.

Rental-car firm Dollar Thrifty (NYSE: DTG) has surged +18% amid the market’s downturn on buyout rumors from both Hertz (NYSE: HTZ) and Avis (NYSE: CAR). Hertz put in the original bid, valued at $940 million, and Avis is mulling a counteroffer. The shares have surged past the $41 per share offer, but an actual deal could be difficult to swing in this market.

Investors have their pick among gold miners that are up, including U.S. Gold Corp. (NYSE: UXG) — up +29%, Eldorado Gold (NYSE: EGO) — up +18%, Seabridge Gold (NYSE: SA) — +17% and Allied Nevada (NYSE: ANV) — up +13%. But the best play of them all is a little further down on our list, Goldcorp (NYSE: GG). The miner is up +7%, but may be the best long-term gold play on the market because it has the lowest production costs in the industry and can still be profitable even if prices drop. (To read more about why we like Goldcorp, read this and this.)