The way to get really rich in US stocks in 2005 was to spot the next fad. Those who foresaw the incredible popularity of the iPod might have invested in Apple Computer, which gained 128.5 per cent.

On its own Apple accounted for a rise of 3.7 points in the S&P 500 index – more than any other stock.

Google, the dominant internet search engine, gained 120 per cent. But the truly perceptive would have seen the potential to profit from the twin trends of America’s obesity epidemic and the rise of the internet.

NutriSystem, a company offering diets and prepared food over the internet, was up 1,547 per cent for the year at one point, before a year-end profit-taking left it with a gain of 1,233 per cent.

Its market capitalisation now stands at $1.25bn, and with a day to go before the end of trading for the year, it seemed virtually certain to be the year’s best performing share on the Nasdaq stock exchange.

Away from the hot fads, the US stock markets had a tough year and battled to maintain the faith of retail investors. By the close on Wednesday, the Dow Jones Industrial Average of 30 blue-chip stocks was effectively flat for the year, up 13 points at 10,796.

The S&P 500, the most widely used index, was up 3.8 per cent, which still could not compare with strong gains for stock markets around the rest of the world. Moreover, almost all of the rise in the S&P could be attributed to the high oil price.

Energy was by far the best performing sector within the S&P, gaining 29.6 per cent.

Valero Energy equalled Apple’s rise of 128.5 per cent to share honours as the S&P’s strongest stock, accounting for 1.61 points of the index’s improvement, while Exxon Mobil, the largest company by market capitalisation, on its own accounted for 3.4 points of the S&P’s rise, second only to Apple.

Without the energy sector, the Dow and the S&P would have been in negative territory for the year – though it could be argued that the high oil price was a factor in denting performance elsewhere in the economy. It probably contributed to the 4 per cent fall in airline stocks and the 5.8 per cent fall for industrial conglomerates.

Rising petrol prices also did no favours to the sector that suffered the year’s most spectacular crash: the motor industry. Components maker Delphi went into bankruptcy and therefore does not appear in the year-end listings. But even with this exclusion, the year’s six worst performing companies in the S&P were all from the auto sector.

Dana, a components manufacturer, suffered the worst percentage fall at 59.7 per cent, while the once mighty General Motors, whose downgrade from the rating agencies roiled the credit markets, fell 53.5 per cent to test historic lows.

There were a few success stories. Homebuilders (up 26.7 per cent) benefited from the strong housing market, though fears persist that this will prove to be a “bubble”. Merger activity pushed the once-moribund steel sector up 21 per cent.

But in general, as the flat year for the Dow showed, large-caps were out of favour, and emphatically vanquished by small-caps.

The Russell 2000 index of smaller companies gained 5 per cent against a 3.8 per cent gain for the Russell 1000 index of large-cap companies.

Among the corporate giants to suffer very bad years were telecoms provider Verizon (down 25.3 per cent), Dell Computer (down 27.3 per cent) and mortgage finance group Fannie Mae (down 32.5 per cent).

The year also saw a sharp reversal in sentiment towards Wal-Mart, the world’s largest retailer (down 9.4 per cent), Pfizer, maker of Viagra (down 12.2 per cent), and internet auctioneer Ebay (down 23.7 per cent).

With so many large and popular companies out of favour, “value” investing – looking for stocks that appear undervalued – continued to beat “growth” investing, or picking companies with strongly increasing earnings.

The Russell 3000 growth index was up 5.95 per cent for the year, against a 7.26 per cent increase for the Russell 3000 value index.

Retail investors appeared to vote with their feet. According to Emerging Portfolio Fund Research of Boston, US equity funds have seen a net outflow of $15.4bn for the year, while investors have instead sent money to global and international funds (recipients of $62.2bn) – the first time since 1990 that international funds have received more money than US funds.

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