Stock winners and losers of 2013 offer lessons

Investors are gleeful about how stocks are steamrolling to a big year, but many may not realize how many big blue-chips have missed the train.

All told, 48 stocks in the Standard & Poor's 500, including big names IBM, Intuitive Surgical, J.C. Penney, Caterpillar and Abercrombie & Fitch, are down this year. It's been a painful experience for investors holding shares of these laggards as the rest of the market has exploded to new highs. The S&P 500 is up 30% this year.

"Where you find earnings disappointments, or overvaluation, you find things haven't performed as well," says Robert Maltbie of Millennium Asset Management. It's even more painful to be left out, given that this market rally has included a broader swath of stocks than ever before. With 452 stocks higher this year, the market's participation is at its best level since the record in 2003, when 458 were up for the year, says Howard Silverblatt of S&P Dow Jones Indices.

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That's not to mask the stellar performance of the winners. Investors turned extremely positive on stocks that were ridiculed or practically left for dead. Netflix was the year's biggest winner, up 280%, as investors appreciated the company's growth and it recovered from a public relations nightmare over pricing changes. Best Buy, supposed to be done in by online retailers, soared 230% as the company started renting space in stores to tech giants Apple, Microsoft and Samsung. Micron Technology, a maker of memory chips, soared 220% as demand for chips for tablets and smartphones took off.

Yet, a closer examination of the left-out stocks reveals interesting clues about the market's direction.

• Several of 2012's "it stocks" are no longer "it." IBM and Intuitive Surgical, maker of robots that help perform surgery, were must-owns in 2012 with many investors, with the stocks up 4.2% and 5.9% respectively. ! But this year, earnings disappointments at IBM and regulatory concerns at Intuitive have pushed the stocks down 8.4% and 25%. Homebuilders, too, had a big run last year. But in 2013, even though the home market is stable, shares of builders Lennar and AvalonBay are down 11.1% and 11.2%.

• Commodity plays. Miners of raw materials are having a tough year, as consumers in emerging nations such as China curb demand. That's been a hit to gold and copper miners Newmont Mining and Cliffs Natural Resources. Also hurt are makers of heavy equipment, such as Caterpillar and Deere, as demand falters, Maltbie says.

• Trampled retailers. J.C. Penney and Abercrombie & Fitch have been struggling to get their mojo in a fickle retail market. Penney is still recovering from a series of missteps under the guidance of former Apple retail head Ron Johnson, which alienated customers. Abercrombie & Fitch's results are suffering due to weak store traffic as its women's apparel designs missed the mark with consumers, according to a report by S&P Capital IQ's Jason Asaeda.

• Tech laggards. Data-storage providers Teradata and EMC both missed the rally, as did networking-equipment maker Broadcom and open-source software firm Red Hat. Disappointing earnings reports are not what tech investors are seeking. Slowing growth at Apple has lead to the stock rising just 6% this year, after being a darling in 2012.

Stock pickers who chose one of these laggards suffered mightily as the rest of the market took off, says Jack Ablin of Harris Private Bank. "It's tough to own individual stocks," he says. "That's where diversification pays off."