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Stock Strategist

2008 Creators and Destroyers--Page 2

We look at changes in market capitalization across the board in 2008.

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As a banking analyst, I assumed Financial Services would be the worst-performing sector by far (and it was the worst overall) as a result of the credit crunch and massive deleveraging of the financial system. But it appears there really wasn't a sector that was spared. Health Care, dropping only 25%, fared the best. With an aging population and most people considering health care as essential, this sector is more recession-resistant than others. The same reasoning works for the Utilities sector--which lost the least in dollar terms. The 2007 darlings of the list--Energy and Industrial Materials--sank as commodity prices tanked.

When looking at individual names, we understand that our market-capitalization focus pretty much makes it impossible for anything but mega-cap and large-cap names to make this list. However, our top performers had to create more than $1 billion of new market capitalization and significantly outperform the S&P 500 in order to make the list. Although most of the largest value creators were either Health Care or ADRs, there were no clear macroeconomic trends of which investors could take advantage. With so few winners to pick from within any of the industries, these results reinforce the importance of Morningstar's bottoms-up approach of investing in attractive companies rather than industries.

Jaime Peters does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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