The Best Performing Stocks of 2010

At least one thing went right in 2010 — the stock market soared.

Despite the never-ending housing bust, sky-high unemployment, and an ongoing debt crisis in Europe, the S&P 500 index rose by about 13 percent in 2010, and that came after a 23 percent gain in 2009. Deep cost-cutting and a modest recovery in sales led to record profits at big firms, and some even started to hire again.

To analyze the highest of the high-flyers, I asked research firm Capital IQ to rank the 2010 stock-price performance of about 1,100 publicly traded U.S. companies with a market value of $1 billion or more. About 150 of those firms enjoyed stock-price gains of more than 50 percent. A few of those companies might be the next Google (GOOG) or Facebook, with killer technology that could help drive the next phase of the digital revolution. Many others are firms on the rebound after being severely beaten down during the recession. And some are simply well-run companies that have become very profitable thanks to innovative products, low debt, and a sharp business plan. Here are the top 10 stock-market performers* of 2010:

Netflix (NFLX) (stock price up 226 percent in 2010). Life's good when your main competitor declares bankruptcy, which movie-rental chain Blockbuster (BLOKA.PK) did in September. Netflix outflanked its rival with its popular DVD-by-mail service, and has been aggressively preparing for the future by inking distribution deals with studios and securing new kinds of technology for online video streaming. Some analysts think the stock is overpriced, but others feel Netflix is on the verge of becoming a new media titan.

Crocs (CROX) (up 209 percent). Toward the end of 2008, the colorful, rubbery shoes made by this company seemed like a fad destined to peter out, as sales plummeted. Worse, an aggressive expansion plan had loaded the company with debt it suddenly struggled to pay off. As losses mounted, the stock plunged to nearly $1. But the company slashed costs, and new products began to catch on. By 2010, sales were soaring above expectations, making Crocs one of the year's comeback stories.

Riverbed Technology (RVBD) (up 201 percent). This San Francisco-based tech firm sells software and equipment that helps companies improve the speed and performance of their digital networks — an important way companies are cutting costs and becoming more efficient. Sales and earnings have surged this year, a trend likely to continue since Riverbed is positioned to be a big beneficiary of the move to "cloud computing" using the Internet and other global networks. The stock continued to rise even after a two-for-one split in November.

Chipotle Mexican Grill (CMG) (up 153 percent). There was barely a recession at this upscale fast-food chain, where traffic and sales have grown consistently over the last several years. While other restaurants have cut prices or offered deals to draw customers, Chipotle has boosted sales with an appealing menu and fresh, all-natural ingredients — and even raised some prices. Minimal debt allows the company to invest heavily in marketing and quality improvements, while continuing to expand.

Atmel Corp. (ATML) (up 167 percent). Sales fell during the recession at this firm that builds specialized computer chips and other components for consumer electronics, cars, avionics, and networking equipment. But cost-cutting and the sale of one expensive division improved performance in 2010, while deals to provide parts for new Smart (SMT) and Samsung (SSNLF.PK) devices boosted the sales outlook. The majority of Amtel's sales come from overseas markets — particularly Asia — which are generally growing much faster than the U.S. economy.

F5 Networks (FFIV) (up 153 percent). Like Riverbed, F5 is sitting pretty thanks to hardware and software that makes corporate computer networks run faster and more securely. The shift to Internet-based "cloud computing" has boosted demand for F5's products and helped it beat sales and earnings estimates all year, which has kept the stocked juiced.

Cummins (CMI) (up 140 percent). The transportation industry stalled during the recession, but this Indiana-based maker of diesel engines has come roaring back, thanks largely to sales in developing nations, which are growing faster than the U.S. market and other mature economies. The company raised its dividend by 50 percent in 2010, and boosted sales and earnings estimates for the next several years.

Deckers Outdoor (DECK) (up 149 percent). Follow a gaggle of teenage girls — practically all of them wearing some form of UGGs — and you'll understand why profits have been soaring at this innovative footwear company. The sheepskin boots are becoming popular in China too, which gives Deckers a strong diversification strategy. And other brands, like Teva and Simple, add depth to Deckers' product portfolio. A three-for-one split in July underscored the company's rich outlook.

United Rentals (URI) (up 129 percent). This heavy-equipment rental company ended 2007 like a spurned bride, after a private-equity firm broke off plans to buy it. Then the recession hammered the construction industry — where much of the demand for United Rentals' earthmoving equipment, power tools, and landscaping gear comes from — driving the stock price more than 90 percent below its 2006 peak. To recover, the company cut staff, closed underperforming outlets, and formed a variety of partnerships. Revenues started to recover in 2010, and analysts think the firm could be a prime beneficiary of a recovery in construction and the broader economy.

LogMeIn (LOGM) (up 129 percent). This Boston-area tech firm conducted one of the few successful public offerings of 2009, and the stock is now almost three times higher than the offering price. That's because LogMeIn is hitched to the success of gizmos like the iPad and iPhone, with software that lets users access a desktop computer from a mobile device. The firm raised its revenue and profit outlook at least three times in 2010, making it a Wall Street darling — just like Apple (AAPL).

*Based on market capitalization as of mid-December, and stock prices as of Dec. 27, 2010.

Related posts:

• See 20 companies that cratered in 2010
• See who will prosper in 2011
• See who will struggle in 2011
• See the worst-performing stocks of 2010

Disclosure: No positions