10 Best-Performing S&P 500 Stocks of 2012 (Update 1)

(Story updated with latest news on AMD and Bank of America)
NEW YORK (TheStreet) -- The top ten performers of the benchmark S&P 500 so far this year include some of the worst performers of last year.

Sears ( SHLD), Bank of America ( BAC) and Netflix ( NFLX) are among the stocks that have shown the biggest increases in 2012 in contrast to last year, when they plunged between 55% and 61%.

Meanwhile, the S&P 500 is up 8.6%, driven by an improvement in the outlook for the U.S. and eurozone economies over the last six months ago. The European Central Bank's large introduction of its first long term refinancing operation in late December has also been credited with fueling a rally in risk assets.

"The best thing that occurred last month, in my opinion, was that on Feb. 24, the S&P 500 recovered all that it lost during the 19.4% correction endured from Apr. 29, 2011 through Oct. 3, 2011," says Sam Stovall, chief equity strategist at S&P Capital IQ.

The ten best performing components of the S&P 500 so far this year have gained between 37% to 116%, topped by Sears. While many of these stocks are still in the negative looking back to the end of 2010, stocks such as Textron ( TXT) are up both year-to-date and back to the end of 2010.

In the reverse order of strong performance, here are the S&P 500's 10 best-performing stocks year-to-date:

10. Eastman Chemical ( EMN)

Performance: up 37.6% (but still down 34.2% from year-end 2010)

Company profile: Eastman Chemical manufactures and markets chemicals, fibers and plastics around the world. In the last few years, Eastman has sold off noncore businesses, choosing to focus on higher-margin specialty products.

Investor takeaway: Eastman announced on Jan. 27 that it will buy specialty chemical maker Solutia for about $3.38 billion in cash and stock as it strives to expand its presence in the emerging markets and move away from the more commodified basic chemicals space, such as the highly oversupplied plastics business it sold in 2011. In the opinion of Morningstar analysts, "the material tax benefits and cost synergies connected with the Solutia deal ending around midyear make the proposed acquisition attractive to Eastman on a valuation basis" and will help further its entry into specialty products, where relationships with customers tend to be tighter.

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9. MetroPCS Communications ( PCS)

Performance: up 37.9% (but still down 4.8% from year-end 2010)

Company profile: Prepaid specialist MetroPCS Communications provides wireless voice and data services on an unlimited fixed-price basis, without a contract The company owns or has access to wireless licenses covering a roughly 146 million people in the U.S.

Investor takeaway: On Feb. 23 MetroPCS shares jumped 15% after the company reported a fivefold increase in net income for the fourth quarter thanks to subscriber gains and tight cost controls. The prepaid wireless specialist reported profit of $91 million, or 25 cents a share, exceeding the average analyst target 16 cents a share, according to a survey of analysts by Thomson Reuters, and improving from the prior year's earnings of $14 million, or 4 cents a share. Revenue jumped 16% to $1.24 billion, meeting analyst estimates.

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8. Advanced Micro Devices ( AMD)

Performance: up 39.6% (but still down 5.6% from year-end 2010)

Company profile: Advanced Micro Devices is the second-largest global supplier of microprocessors based on "x86" chip architecture and also one of the largest suppliers of graphics processing units. Most of the firm's sales are generated from the computer market.

Investor takeaway: "AMD is clearly having plenty of success with its Fusion products in the desktop and notebook PC segments," say Morningstar analysts of the breakthrough chip it unveiled at the Jan. 2011 Consumer Electronics Show in Las Vegas and that many believe will help AMD shed its underdog status in the multibillion-dollar chip market dominated by behemoth Intel ( INTC). Bernstein Research recently raised its recommendation on AMD to outperform from market perform as the company has resolved painful supply issues.

AMD said late Wednesday that it will buy Silicon Valley start-up SeaMicro, a chip designer with a specialization in servers, for $334 million, in what is viewed as a direct challenge to Intel in the data centers market.

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7. Bank of America ( BAC)

Performance: up 39.9% (but still down 39.4% from year-end 2010)

Company profile: Bank of America is one of the largest financial institutions in both the U.S. and overseas, lending to consumers, small businesses and corporations, in addition to its asset management and investment banking divisions. The company operates in 50 states.

Investor takeaway: Warren Buffett has purchased $5 billion worth of Bank of America warrants to buy 700 million shares at $7.14 a share, explaining in his latest shareholders letter that the banking industry "is back on its feet" and praising CEO Brian Moynihan for making "excellent progress" in "cleaning ... up" some "huge mistakes" made by prior management. The warrants "will likely be of great value before they expire," he said. Through Project New BAC, Moynihan is cleaning up in several phases, including the eradication of 30,000 jobs that began last year and slashing of costs by $5 billion a year by 2014. Last year, Bank of America's revenue fell to $45.6 billion from $52.7 billion the prior year as customers retaliated against the firm's efforts to hike fees, though it swung to net income of $1.4 billion after a net loss of $2.2 billion the year before.

The The Wall Street Journal reported today that Bank of America is still dreaming up new bank fees with plans to introduce a monthly fee for customers with basic checking accounts unless they agree to bank online, buy more products or maintain certain balances.

Bank of America pilot programs in Arizona, Georgia and Massachusetts now are experimenting with charging $6 to $9 a month for an "Essentials" account, the newspaper said, which cited a memo distributed to employees.

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6. Salesforce.com ( CRM)

Performance: up 40.7% (up 5.6% from year-end 2010)

Company profile: Salesforce.com is the leading provider of business software applications over the Internet. Salesforce.com has more than 92,300 customers around the world and derives more than 30% of its revenue from overseas.

Investor takeaway: Salesforce.com shares jumped 6.6% to $140.50 in after-hours trading Feb. 23 after the company reported fourth-quarter earnings of 43 cents a share on revenue growth of 38% to $632 million from a year ago. Both results beat Wall Street forecasts and confirmed that the "cloud computing" movement of which Salesforce was one of the pioneers is becoming increasingly mainstream, with large companies recognizing more and more the advantages of having software application needs run on remote servers; it saves money, software can be upgraded much more easily and it's convenient. Salesforce says it completed four times the number of seven-figure deals last quarter compared with a year ago in the fourth quarter including one with Hewlett-Packard ( HPQ), and this quarter scored its first nine-figure deal with an anonymous company.

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5. LSI Corporation ( LSI)

Performance: up 42% (up 39.3% from year-end 2010)

Company profile: Milpitas, Calif. -based LSI designs semiconductors and software that optimizes data storage and networking performance. The company outsources most of its chip production, testing and assembly to third-party vendors.

Investor takeaway: Investors are optimistic about continued revenue growth for the company following its acquisition of SandForce, a chipmaker in the flash memory space, for about $370 million. Standard & Poor's analysts for instance estimate growth of 16% this year, largely attributable to the purchase. The acquisition will provide "significant growth potential" in the robustly growing flash storage processors market, they explain. However, they warn of some "elevated business risks" for the company as it becomes a pure-play semiconductor company heavily tied to the storage markets.

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4. Textron ( TXT)

Performance: up 48.7% (up 15.6% from year-end 2010)

Company profile: Aerospace and defense conglomerate Textron owns a global network of businesses include Bell Helicopter, Cessna Aircraft Company, E-Z-GO, Greenlee, Jacobsen, Kautex, Textron Financial and Textron Systems. The $10.5 billion company has 32,000 employees in 25 countries.

Investor takeaway: Morningstar notes that company's industrial division is rebounding with improving auto production and that as corporate profits expand, demand for its business jets will return, helping to increase Cessna's profits "sharply." For 2012, management is targeting an 11% improvement in sales, driven by further gains at Cessna and Bell, and $1.80 to $2 in earnings per share, which is about 35% to 50% higher than 2011's. Textron reported a 4% top-line improvement for its fourth quarter, led by an 11% year-over-year jump in the industrial segment and mid-single-digit gains in both the Cessna and Bell businesses. "Importantly, the firm was also able to continue its noncore financial asset liquidation," say Morningstar analysts, with $386 million in sales during the quarter.

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3. Netflix ( NFLX)

Performance: up 58.3% (but still down 41.3% from year-end 2010)

Company profile: Netflix operates a fast-growing DVD rental and video streaming service and its customers are transitioning from DVDs to digital streaming content.

Investor takeaway: After an over 60% decline in prices over the last seven months, shares of Netflix are now "fairly valued," say Standard & Poor's analysts. Netflix shares had been dropping as large numbers of subscribers defected in response to the company's controversial price hikes. But investors are beginning to regain confidence in the company as its subscriber growth rebounds following recent launches in Canada and Latin America. More launches will be taking place in the United Kingdom and Ireland in the first quarter. Netflix's unique DVD and streaming subscribers could exceed 32 million in 2012, according to Standard & Poor's. "Defections ... have run their course," they say.

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2. Whirlpool ( WHR)

Performance: up 61.4% (but still down 15.7% from year-end 2010)

Company profile: Whirlpool is a leader in the $120 billion global home appliance industry. Its most famous brands are Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Bauknecht, Brastemp and Consul.

Investor takeaway: Whirlpool shares popped about 20% on Feb. 1 after the company provided strong 2012 guidance despite a weak fourth quarter, attributing this to improving demand outlook. Whirlpool forecast earnings of $6.50 to $7 a share, exceeding the Wall Street consensus target of $5.85. The company cut about 5,000 jobs last year and expects more cost cutting this year. Shares have also gotten a boost from hopes of a bottoming housing market, with the National Association of Realtors reporting Monday that pending home sales approached a two-year high in January; though the following day S&P/Case Shiller reported that its 20-city home-price index saw a year-over-year 4% drop in December. "We recently lowered our recommendation of Whirlpool to sell, from hold, reflecting our concern about a slower global economic recovery," say S&P analysts.

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1. Sears Holdings ( SHLD)

Performance: up 116.3% (up 1% from year-end 2010)

Company profile: Sears Holdings, parent company to Sears, Sears Canada and Kmart stores, is the fourth-largest broadline retailer in the U.S. and the nation's largest home services provider, with more than 11 million service calls received every year.

Investor takeaway: Sears shares have been driven higher from its status last year as one of the worst-performing S&P 500 stocks by investors buying into Sears' message about turning itself around and encouraged by chairman and hedge fund manager Edward Lampert's purchase of about $130 million in Sears shares in early January, on which he has seen more than $160 million in paper profits so far. The company, struggling to keep up with competition and to be profitable, has largely been able to fend off liquidity fears through cost cutting and asset sales and has tried to create shareholder value through $1 billion in share buybacks over the last three years. Morningstar analysts note that Sears skeptics point out that the company "can't shrink its way to profitability. Sales keep declining as fast or faster than management can cut costs and reduce inventory. Store closings will not be enough."

>>To see these stocks in action, visit the 10 Best-Performing S&P 500 Stocks of 2012 portfolio on Stockpickr.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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