Winners and Losers in 2015

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It wasn't the best year for the stock market overall, with the Dow Jones Industrial dropping a net 200 points over 2015 while the S+P 500 dipped by 50 points.  The broader picture doesn't do justice to some of the biggest gainers, however, who enjoyed as much as double the returns on the investment from January 1st to December 31st.  At the last tally of the last ticker, who were the biggest winners and losers in 2015?

Winner: Netflix

Unless you have neither a television nor an Internet connection, odds are good that you've been inundated with news about Netflix (NFLX on the NASDAQ, trading for $112.22 a share) all year.  The entertainment company that started as a modest video-rental rival to Blockbuster has become a titan of the industry.  The streaming video service provider beat every other stock in the top 500 this year, posting a mammoth 134% gain from start to finish.  There's no shortage of reasons why investors love Netflix: not only are they light-years ahead of the competition of Amazon and Apple TV streaming services in providing options, but they've forged their own path to develop highly-rated original shows like House of Cards and Orange is the Net Black that enjoy stellar ratings.  George Soros reportedly purchased no less than a quarter of a million shares of Netflix this year, and can't have been unhappy with the return.  While there's little value here, there's still plenty of room for growth: Netflix is now available in nearly every country in the world and wants to double the quantity of their available content by the end of 2016.  It's hard to find a company with more ambition.

Loser: Chesapeake Energy Corporation

Not quite the sexiest name in the S+P, Chesapeake (CHK on the NYSE, trading for $4.43 a share) downright took it on the chin during 2015.  The drop in the price of oil and natural gas made it too difficult to profit off of their sole product.  With a relatively mild winter and summer, furthermore, less energy was needed for heating and cooling this year.  While ten of the eleven worst-performing stocks in the S+P were in the energy sector, none did worse that CEC, who lost no less than 77% of their asking price in just 365 days.  Oversupply of natural gas, furthermore, made it hard for Chesapeake to sell at a premium.  Should investors consider buying Chesapeake shares while the value is low?  It takes a special combination of bravery and foolishness to say yes: energy remains cheap and plentiful across the world, not just on the eastern seaboard, especially as new pockets of massive supply continue to be uncovered.  Chesapeake will need to drastically change its business strategy in order to avoid being de-listed -- and perhaps even filing for bankruptcy -- in the immediate future.

Winner: Activision Blizzard

We'll take the opportunity to point out we've been bullish on Activision Blizzard (ATVI on the NASDAQ, trading for $36.06 a share) for quite some time now.  Their video games not only sell well, but retain a fantastically loyal customer base, meaning that it will take an asteroid-sized competitor to show them up at their own game.  Activision has the rights to print money due to two main franchises, their Call of Duty and Warcraft intellectual properties, both of which have a tendency to sell games in the tens of millions.  Furthermore, they made a delicious splash in November by acquiring King Entertainment, the makers of the Candy Crush mobile games that your daughter or wife is likely addicted to.  Nor is Activision sitting on its laurels: it'll release a new game series called Overwatch in 2016 as well as a Warcraft movie and a TV show based on their Skylanders game.  Even so, Activision stock is surprisingly cheap: archrivals EA trade for twice their value.  There's plenty of room for Activision to grow further.

Loser: Fossil Group

While this list could contain nothing but losers from the energy industry, it's important to point out how Fossil Group (FOSL on the NASDAQ, trading for $30.49 a share) has failed to reinvent itself for today's consumer audience.  Indeed, their name was originally iconic but is increasingly looking just ironic: the watchmakers continue to manufacture and sell products that are becoming less and less relevant due to the hyper-saturation of smart phones.  Why check the time on a watch, after all, when you can do so just as easily from your multi-faceted phone?  Their stock has dropped by some sixty percent this year due to the emergence of the Apple Watch as well as competition from fitness trackers that can tell both the time and your heart rate.  Fossil Group faces a number of threats, including tumbling revenue, with little hope on the horizon: their sales in North America, Europe, and Asia have all dropped by double-digit percentages, with nearly a fifty percent drop in sales overall.  Few companies can maintain that type of performance and come out unscathed; it's hard to see how Fossil Group can pull a rabbit out of its hat without a major shakeup.

  • The Takeaway: entertainment was king in 2015.  There's little reason to think that trend won't continue through 2016, especially since we spend an average of eight hours per day looking at a television or computer screen.  Netflix and Activision should continue strong performances this year, while Amazon, CableVision, and NVIDIA also succeed thanks to the pixel boom.  These stocks aren't necessarily in competition with one another, either: innovations that produce more viewers and more screen time will lift all their fortunes.
  • Energy stocks look as unappealing in 2016 as they did in 2015.  Without an agreement to cap oil and gas production, domestic and foreign oversupply will continue to drive prices further down -- perhaps even to historic lows.  Energy companies should either be off the radar for your portfolio this year, or purchased only as a very, very long-term value buy for those with both patience and a willingness to take on risk.

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