The 10 Best Performing Nasdaq Stocks Of 2011

The Nasdaq Composite Index, once known as a high-flier because of its technology-company constituents, recently has been moving in step with the benchmark S&P 500 Index.

As a result, the Nasdaq as a whole is largely unattractive to investors, who are taking on greater risk for similar returns.

But picking and choosing among industries in the Nasdaq can be lucrative. Computer hardware has risen 8% this year; semiconductor equipment and materials is up 14%; software, up 11.8%; and computer systems, up 8.9%.

In fact, the Nasdaq’s 10 top performers this year, mainly technology, Internet and medical-device companies, are boasting returns of 21% to 44%. Their performances were boosted by the economy’s steady recovery as well as product innovations that excite investors. The Nasdaq Composite Index, in contrast, has gained 4.7% this year, trailing the S&P 500’s 5.6% increase. Plus, the Nasdaq’s price-to-earnings ratio is a lofty 28.9, almost double that of the S&P 500.

Nevertheless, the Nasdaq has been moderately calm this year, considering the issues investors have had to face. They include the political upheaval in the Middle East, which drove oil prices over $100 a barrel and spiked inflation fears, as well as the earthquake and nuclear-plant disasters in Japan, which threatened supplies of key manufacturers and suppliers of some of the leading companies in the technology industry, which makes up the biggest component of the Nasdaq Composite Index.

And some investors have lost a lot of money on Nasdaq stocks. The bottom 10 performers this year, with share-price declines ranging from 12% to 28%, include, in order of biggest loser to smallest: F5 Networks (FFIV_), Akamai Technologies (AKAM_), Urban Outfitters (URBN_), PACCAR (PCAR_), Cisco Systems (CSCO_), Expedia (EXPE_), Marvell Technology Group (MRVL_), Staples (SPLS_) and Activision Blizzard (ATVI_).

What follows is a summary of the 10 top-performing Nasdaq stocks this quarter, in inverse order of return:

10. Altera (ALTR_) is the second-largest designer of programmable logic devices by market share. Its chips are used in products used in the communications, data processing, industrial, consumer and automobile industries.

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Photo: The Street

The company’s shares are up 21% this year and 81% over the past year. Its price-to-earnings ratio is 17.6, versus 20.5 for its industry peers.Altera is coming off a strong fourth quarter, when revenue rose 5% from the third quarter to $555 million. Investors are lured by the company’s exposure to wireless-equipment makers, as these customers are seeing robust demand from wireless carriers as they build out 3G and 4G networks.

Standard & Poor’s has a “hold” rating on its shares and a $43 price target, which Altera just exceeded. The ratings firm expects sales to sales rise 13% in 2011, compared to a 63% jump in 2010.

Analysts tracked by S&P give it five “buy” ratings, seven “buy/holds,” 15 “holds” and two “weak/holds.”

9. Priceline.com (PCLN_) is an online travel company that provides booking services for hotel rooms, airline tickets, rental cars, cruises and other vacation packages. The company has seen its shares rise 21% this year through March 28, and 92% over the past year.

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Photo: The Street

Its recent strong fourth-quarter results, which include a 44% increase in bookings fuelled by a 65% growth rate outside the U.S., has caught investors’ attention.Morningstar analysts say that “Priceline’s international growth is more profitable than its North American business because it can negotiate better premiums with the more fragmented supplier base in Europe and Asia.”

Its shares are trading at about $497, giving them a price-to-earnings ratio of 47.6 versus 30.1 for its industry peers.

Last month, Priceline.com reported that that its fourth-quarter net income totaled $2.66 per share, up from $1.55 per share in the same period last year, while revenue rose 35%.

Goldman Sachs (GS_) recently raised its price target on the company’s shares to $525 to go with its “buy” rating. It also hiked its earnings estimate based on higher expected sales and a lower tax rate.

Standard & Poor’s has a “hold” rating on Priceline.com’s shares as they have exceeded its price target, but it said in a research note that it expects revenue will increase 31% in 2011 and 19% in 2012, due to market-share gains, healthy volumes and stable-to-improving pricing.

8. KLA-Tencor (KLAC_) makes yield-management and process-monitoring systems for the semiconductor industry. Its systems are used to analyse the manufacturing process at various steps in a product’s development, resulting in lower production costs and maximise productivity for chipmakers.

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Photo: The Street

The company is seeing increasing demand as semiconductor makers are benefiting from the economy’s rebound and purchases of computer and personal-technology devices.At year-end, KLA-Tencor had $1.6 billion in cash and investments and $746 million in debt on its balance sheet.

The company’s shares are up 22% this year and 58% over the past year.

Standard & Poor’s gives it a “buy” rating and has a $53 price target on its shares.

Sales rose 20% in 2010, and it estimates sales will rise 69% in fiscal year 2011, which ends June 30, and 1.1% in fiscal 2012.

Analysts’ ratings are all over the map, as S&P found three “buys,” five “buy/holds,” nine “holds” and one “sell.”

7. Whole Foods (WFMI_) is the largest U.S. retailer of natural and organic foods, with 300 stores in the U.S., Canada and England. The company has seen its shares rise 25% this year and 78% over the past year, giving it a price-to-earnings ratio of 40.7, double that of its industry peers.

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Whole Foods‘ strong performance is helping boost shares. Fiscal first-quarter revenue rose 14%, due primarily to existing store gains. This after comparable-store sales grew 7.1% last fiscal year, and its operating margin improved 1.4 percentage points.Also contributing to its attractiveness to investors is that in early February, the company raised its 2011 performance outlook to earnings of $1.76 to $1.80 per share, up from a range of $1.66 to $1.71 per share, and it raised its identical-store sales forecast to growth of 7% to 9%, up from 5% to 7%.

6. Nvidia (NVDA_) is a leading designer of graphics chips that enhance the interactive experience on computing platforms.

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The firm’s chips are used in a variety of products including personal computers, handsets and game consoles. Its shares’ performance has been helped by a strong fourth quarter.The company reported revenue rose 5% over the third quarter and net income jumped to 29 cents per share from 15 cents.

Nvidia’s shares are up 25% this year, but only 9% over the past 12 months. It has a price-to-earnings ratio of 44.6, about double that of its industry peers.

The comany’s shares got a bump this week after JMP Securities upgraded the stock to “outperform” from “market perform.” Its analyst cited “positive checks and industry developments indicating that adverse PC exposure is bottoming and that its ARM-based Android and Windows initiatives are in a position to re-accelerate its financial performance in coming quarters and years.”

5. Intuitive Surgical (ISRG_) is a maker of robotics-assisted, minimally invasive surgical systems.

The company’s shares rose sharply after it posted outstanding fourth-quarter results that exceeded investors’ expectations.

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Photo: The Street

Sales grew 21% in the fourth quarter to $389 million, led by a 35% rise in procedures performed and a 33% gain in instrument sales, and a 10% advance in system sales, indicating that more hospitals are buying and quickly adapting to its products to perform surgeries. The results prompted analysts to boost their outlook for 2011.Intuitive Surgical’s shares are up 28% this year to around $336, which represents a 35.3 price-to-book ratio versus the 27.2 of its industry peers.

According to a survey by TheStreet, analysts’ ratings are seven “strong buys,” one “moderate buy” and seven “holds.”

Standard & Poor’s has a “hold” rating on its shares based on its recent share-price appreciation. It has a 12-month price target of $347.

S&P said it expects sales to rise by about 18.5% in 2011, following its 34% jump in 2010, and the company will see a slowdown domestically and have to look to Europe for the next leg up in sales.

4. Netflix (NFLX_) is a DVD-rental-by-mail service with 20 million subscribers who pay a monthly fee. It is in the process of trying to transition those customers into digital video streaming customers.

Netflix added 6.4 million paying subscribers in 2010, including 2.4 million in the fourth quarter — very positive trends.

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Photo: The Street

The company’s shares are up 35% this year to a stratospheric $237. Its valuations are also sky-high, as it carries a price-to-earnings ratio of 80 versus the 27.3 of its industry peers.Analysts’ views are turning negative as TheStreet’s review of rankings found 10 “strong buys,” two “moderate buys,” 12 “holds” and eight “strong sells.”

Standard & Poor’s has a “sell” rating on its shares and a $160 price target, clearly stating that it thinks its shares are overpriced. It says one of the risks is that due to the rapidly evolving trends in the home-entertainment industry, “its DVD subscription business could eventually face obsolescence,” although the company is working to adapt to industry trends and leverage its growing subscriber base via the Internet.

3. Vertex Pharmaceuticals (VRTX_) discovers and develops small-molecule drugs for the treatment of life-threatening diseases. Its shares are up 35% this year through March 28, and 18% over the past year.

Goldman Sachs recently reiterated its “buy” rating on Vertex and raised its price target to $49. Shares are currently trading at $48.46.

The U.S. Food and Drug Administration is reviewing two hepatitis C drugs, one from Vertex and one from Merck (MRK_), and it is expected to release information on its progress toward approval in late April. The company’s drugs are competing against each other for a potentially huge, lucrative market, and the reviews will result in outside experts recommending whether the agency should allow the drugs to come to market.

However, Vertex’s long-term share value is heavily concentrated in its hepatitis C program, and the firm recently released positive news on the results from a Phase III study of its drug, VX-770, for the treatment of cystic fibrosis.

2. Shares of the Chinese Internet search engine Baidu (BIDU_) are up 39% this year. The firm provides Chinese and Japanese language Internet-search services to its huge Asian customer base.

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Photo: The Street

Baidu’s customers include 220,000 advertisers, mostly small and medium-sized businesses. The company derives the bulk of its revenue by providing online advertising through an auction-based pay-for-performance service.With its shares trading at around $136, its price-to-earnings ratio is a whopping 138.9 versus the 27 of its industry peers.

On Wednesday, Goldman Sachs reiterated its “buy” rating on its shares and raised its 12-month price target to $145. It also raised its earnings estimates, noting that the company is gaining market share.

According to TheStreet, analysts give it 10 “strong buy” ratings, three “moderate buys,” four “holds” and one “strong sell.”

1. Micron Technology (MU_), with a 44% return this year, is the top performer in both the Nasdaq and S&P 500 indices.

Despite that eye-popping gain through March 28, its shares are up only 10% over the past 12 months.

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Photo: The Street

The company is one of the leading producers of dynamic random-access memory (DRAM) chips, which enables quick access of data stored on computers for processing. Customers include computer manufacturers such as Hewlett-Packard (HPQ_) and IBM (IBM_).Micron is benefitting from steadily increasing demand for memory in electronic and telecommunications devices, as consumer spending grows. Sales of DRAM products account for more than half of Micron’s revenue. It has also has a partnership with chipmaker Intel (INTC_) to expand its presence of the flash-chip market in recent years, which is one of the fastest-growing chip-industry segments.

Two weeks ago, the company reported fiscal second-quarter revenue of $2.3 billion, which was roughly flat from the first quarter’s sales, and its operating margin narrowed to 8% in the second quarter versus 17% in the first quarter.

Standard & Poor’s has a “buy” rating on Micron’s shares and a $13 price target. It forecasts a revenue increase of 14% in fiscal 2011, which ends Aug. 30, after a 77% rise last year. S&P expects revenue to advance 18% in 2012.

Analysts’ earnings estimates are 51 cents per share for fiscal 2011, and a jump of 125% to $1.15 per share in fiscal 2012.

Micron shares get nine “buy” ratings, eight “buy/holds,” six “holds” and one “weak/hold” from analysts, according to S&P.

This post originally appeared at The Street.

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