Investing

The top 10 best-performing stocks of the two-year-old bull market

Stocks have been on a tear since the bull market began a year ago. Here are the top 10 performers.

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Key Points
  • The S&P 500 returned 101% in the 24 months since the bull market began on March 23, 2020.
  • GameStop and Tesla, both darlings among retail traders, crack the list. Many so-called "work from home" stocks missed the cut.
  • Avoid pinning your hopes to any one stock that has already undergone huge gains, experts warn.

If you think things look bleak in the stock market today, take a moment to think back to March 2020. By March 20 of that year, the S&P 500 had experienced its steepest and fastest decline into bear territory in history, plunging nearly 34%.

When the market closed that Friday, plenty of nervous investors spent the weekend wondering how much worse things would get.

It turns out, not worse at all. In fact, the market bounced back in a sustained and impressive way.

March 23 marks the two-year anniversary of what's become a stellar bull market: Despite recent volatility, stocks in the S&P 500 have returned 101% in the past 24 months.

The list of the top 10 performers over that time includes some names you might expect, such as meme-stock king GameStop and electric automaker Tesla, along with some that aren't familiar to casual investors.

Top 10 best-performing stocks of the recent bull market

The Grow team used data from YCharts to find the 10 stocks in the Russell 1000 — an index tracking the 1,000 largest U.S. stocks — with the highest returns over the past 24 months.

The big winner is familiar to folks who follow market news.

After hovering around $5 per share for much of 2020, Gamestop stock shot up to as much as $325 in early 2021 as traders on online forums piled into the stock, forcing what's known as a "short squeeze" — a scenario in which short-sellers are forced to start buying shares to mitigate their losses. The share price dipped below $41 in February 2021 and has ping-ponged around since, as traders have taken turns speculating on the shot-term value of the stock.

Gamestop has trended mostly downward in 2022, but after a recent uptick sits at $137 per share — still a huge gain if you got in at $5.

Two stocks that saw huge pops early on in the pandemic have held onto their leads despite some choppiness in the price. Electric automaker Tesla got off to a roaring start, returning 671% in the first year of the bull market. The stock has been up and down since then, and sits 18% below its all-time high from November 2021, but has nevertheless submitted an eye-watering 959% return over the course of the bull market so far.

Vaccine manufacturer Novavax's current $81 stock price is a far cry from its February 2021 high of $290. Even so, given that it traded at $8 to start the bull market, investors who have held on for the past two years are still well in the black.

Investors bullish on the prospect of widespread legalized sports gambling pushed up shares of Caesars stock, which benefited from a basement-low price at the beginning of the bull, too. Investor sentiment that Covid lockdowns would crimp business in Las Vegas saw the shares, now priced at $78, fall to less than $9 in March 2020.

Conspicuously missing from the top 10: tech stocks. They led the way during much of the early bull market gains but have been dinged of late by the threat of rising interest rates and widespread market uncertainty, which has pushed investors toward less risky assets.

Also MIA: Pandemic and "work-from-home" stocks. The likes of Peloton and Zoom sported brutal 12-month returns.

In their place are a raft of stocks benefitting from rising oil and commodity prices. Devon Energy, Targa Resources, and APA are all involved in either exploration, production, or transportation of oil and natural gas, and all see a sharp uptick in profitability when oil prices are high.

With metal prices surging due to constrained supply exacerbated by the war in Ukraine, Alcoa (aluminum), Freeport-McMoRan (copper), and Cleveland Cliffs (steel) have all reaped huge benefits.

'You shouldn't buy a stock' just because it recently outperformed

When it comes to the market's highest-flying names, investors shouldn't necessarily expect more of the same. As a general rule of thumb, investors should always remember that past performance is not an indicator of future results. What's more, after each of these stocks has skyrocketed in value, buying now means you're likely paying a high price for the shares.

That doesn't mean any stock on the list won't continue to go up. But it goes to the point that buying any individual stock requires serious analysis of the company's underlying fundamentals and an understanding of the future trajectory of the business.

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"You shouldn't buy a stock without having a rationale for why you think it's attractive," says Charles Rotblut, vice president of the American Association of Individual Investors. "Before you buy on a tip, ask yourself: 'What is it about this company that I like? What do I think it's going to do? What could possibly go wrong?'"

Rotblut suggests heading to the company's website to read earnings statements and SEC filings, focusing on trends in revenues and earnings as well as any potential risks to the businesses that executives highlight. It's also worth browsing investor presentations in which execs detail their future plans for the company, he says.

It can be safer to invest in favorite stocks using an ETF

Maybe you know you want to up your portfolio's exposure to energy stocks, for instance, but don't want to dig through Devon's or Targa's financials. This is where a thematic exchange-traded fund can come in handy, says Todd Rosenbluth, director of ETF and mutual fund research at CFRA. "If you have a core part of your portfolio using S&P 500 index fund or a total stock market fund, then you could use this as an opportunity to complement, supplement, and take on additional risk."

These funds, which allow you to invest in multiple businesses that fit a particular theme, come with less risk than holding any individual stock, which could go up or down based on company-specific factors. "You could pick a thematic ETF tied to something that resonates with you, that you understand, and that you think has long-term potential," he told Grow.

If you think one of these stocks is exemplary of a particular theme you're interested in, use an online tool to find ETFs that hold one or more specific stocks. The tool at ETF.com allows you to find funds with the biggest holdings in a particular name.  

A search for Freeport-McMoRan, for instance, might lead you to the Global X Copper Miners ETF (COPX), which holds a basket of copper-mining firms, or to the SPDR S&P Metals and Mining ETF (XME), which holds a more diversified portfolio of companies that mine for various metals.

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The ETF screeners at several major online brokerages, including Fidelity, allow you to search for ETFs that hold up to five stocks. Investors interested in gambling stocks might plug in Caesars and find the VanEck Gaming ETF, which holds Caesars alongside the likes of MGM and DraftKings.

You may unearth ideas you hadn't considered yet. Gamestop and Tesla are among the top holdings in the SoFi Social 50 ETF, which tracks an index that holds the 50 most widely-held stocks in self-directed brokerage accounts.

When choosing any ETF, check under the hood to make sure the holdings align with the theme you're hoping to add to your portfolio. When comparing two ETFs that track the same theme, favor the one offering consistent, long-term performance and low expenses, says Rosenbluth: "Don't just pick the one that performed the best lately."

The views expressed are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses.

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