Investors will remember the 2000 market for the Internet meltdowns like CMGI (CMGI) (down a woeful 96% this year) and Akamai Technology (AKAM) (off 94%), but some may also look back and recall shimmering standouts like OSI Pharmaceuticals (OSIP) and Aeroflex (ARXX), which rose a staggering 909% and 594%, respectively.

Health care dominates the list of the 10 best-performing stocks of 2000, with four biotechnology concerns, one medical equipment company and a clinical laboratory testing outfit.

Best-Performing Stocks of 2000*
Stock YTD Return
OSI Pharmaceuticals (OSIP:Nasdaq) 909.4%
Aeroflex (ARXX:Nasdaq) 594.3%
Cell Therapeutics (CTIC:Nasdaq) 543.8%
Manhattan Associates (MANH:Nasdaq) 478%
Fuelcell Energy (FCEL:Nasdaq) 447.1%
Impath (IMPH:Nasdaq) 422.8%
Newport (NEWP:Nasdaq) 415.5%
Laboratory Corp. of America (LH:NYSE) 377.2%
Quest Diagnostics (DGX:NYSE) 364.6%
Dynegy (DYN:NYSE) 364.1%
Source: Morningstar. *Minimum market capitalization: $1 billion. Performance through Dec. 27.

Robert Toth, an analyst with Prudential Vector Healthcare, ascribes the biotech sector's run-up to its maturity. "The early promise of biotech was realized for the first time in 2000," Toth says. "Investors have much more confidence in the pipeline."

Top performer OSI benefited after gaining the rights from Pfizer ( PFE) to an anticancer compound that could treat as many as 600 million patients with different types of cancer, including colorectal cancer, according to Toth. (He rates OSI a strong buy and his firm has done underwriting for the company.) He also estimates the potential size of the drug's market at $7 billion to $10 billion in five to seven years.

Landing the Rights

Drugs were also good for Cell Therapeutics ( CTIC - Get Report), the third-best performer with a 544% return. The biotech company acquired the rights to Trisenox, a treatment for patients who suffer from a severe form of leukemia, but which can also be effective in treating other types of cancer. In the pipeline is a version of Bristol-Myers Squibb's ( BMY) cancer drug Taxol, which took in $1.5 billion worldwide in 1999.

Alan Auerbach, an analyst at First Security Van Kasper, expects the sector's strength to continue. "There are a record number of drugs in clinical trials, and the number of companies turning profitable will increase by orders of magnitude," Auerbach says.

Energy problems in the U.S. proved fortuitous for FuelCell Energy ( FCEL), No. 5 on the list, which enjoyed its 447% return because of the fundamental idea of "finding alternatives to the traditional electric utility grid," says Sam Brothwell, an analyst with Merrill Lynch. (He rates FuelCell a buy, and his firm has done underwriting for the company.)

FuelCell has developed a more efficient way of generating electricity. Over the last year, it took "some steps that brought its technology closer to commercialization," with full commercialization to come between 2001 and 2002, says Neal McAfee, an analyst at Morgan Keegan. (He rates FuelCell a market perform, and his firm has done no underwriting for the company.)

One Word: Optical

The magical word "optical" helped Aeroflex bounce back in 2000 from a disappointing 1999. Its fiber-optic related business has more than doubled in two years, from $15 million in fiscal 1998 to $34 million in fiscal 2000 (which ended in June), on the back of a thin film circuit product that's sold to the likes of JDS Uniphase ( JDSU), Lucent ( LU) and Nortel ( NT). That business is an increasingly large part of the company's overall business. However, a slowdown in optical network spending could slow that rise.

Similarly, Manhattan Associates ( MANH), the lone software company in the top 10, rose 478% during the year after a tough 1999. But a new management team and a new business-to-business product called infolink are "providing a lot of upside opportunity for this stock," says Chris Rowen, an analyst with Robinson-Humphrey who rates Manhattan a buy and whose firm has done underwriting for the company.

On the flip side, not surprisingly, the 10 worst-performing stocks of 2000 were littered with Internet-related casualties.

Worst-Performing Stocks of 2000*
Stock YTD Return
CMGI (CMGI:Nasdaq) -96%
Akamai Technologies (AKAM:Nasdaq) -93.6%
Liberty Digital (DDIG:Nasdaq) -93.2%
Internap Network Services (INAP:Nasdaq) -91.6%
DoubleClick (DCLK:Nasdaq) -91.3%
Foundry Networks (FDRY:Nasdaq) -90.1%
Liberate Technologies (LBRT:Nasdaq) -89.4
Kana Communications (KANA:Nasdaq) -88.8%
Excite@Home (ATHM:Nasdaq) -87.1%
Novell (NOVL:Nasdaq) -86.9%
Source: Morningstar. *Minimum current market capitalization: $1 billion. Performance through Dec. 27.

CMGI, which gained infamy for its incubation of various Internet concerns, is attempting to adjust to a new world where Internet-related initial public offerings are poison, if they're even possible. In cutting loose a number of companies in its portfolio, CMGI also has to justify its existence by convincing investors it will continue to support the rest of its companies.

Also investment failures were the plays on the future of the broadband Internet, such as Akamai, Liberate Technologies ( LBRT) (down 89%) and Excite@Home ( ATHM) (down 87%). Meanwhile, DoubleClick ( DCLK) (down 91%) was hit by the slowdown in advertising on the Internet, with no clarity as to when that will be reversed. Unlike America Online ( AOL), which also makes money from Internet ads, it lacks the bank of subscribers who pay monthly for the privilege of access.

Meanwhile, Foundry Networks ( FDRY), which just last week warned of a shortfall in fourth-quarter profit and revenue, made the list by falling 90%. The announcement by Foundry, a maker of communications equipment, confirmed that the providers of data networking equipment, like providers of voice network equipment, are also susceptible to the looming spending slowdown.