U.S. stocks crossed every economic and political hurdle that the Greece default concerns, uncertainty regarding the coming interest rate hike and a strong dollar could put up, keeping the marathon bull run into its seventh year. Both the large cap indices; S&P 500 (SPY) and Dow Jones (DIA), managed to stay in the green in the first half, adding 2% and 0.7%, respectively, so far.

The gains have been broad-based, with the tech-heavy Nasdaq Composite index (QQQ) and the small-cap Russell 2000 index (IWM leading the way higher, having returned a respective 7.3% and 6.2% so far. The S&P Mid Cap 400 Index has also been an outperformer, having 5.5% gains to its credit year to date. This trend is likely to continue as the Fed has committed to a slower and gradual rates increase, which is not expected anytime before late September or October, suggesting one more quarter of cheap money flows into the economy.

Additionally, stepped-up economic and business activities, an accelerating job market, recovering housing fundamentals, rising consumer confidence and merger mania will continue to drive the stocks higher. Oil prices, which were endangering global growth and led to deflationary pressure, have rebounded from their rock-bottom levels while the U.S. dollar weakened slightly in recent weeks.

All these positive developments led to quite a few winners in many corners of the equity space. Of these, we highlight the top 10 performing stocks of 1H2015. These stocks not only crushed the broad market returns, but also have the potential to outperform in the second half.

So what makes these a cut above the rest? First, a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold). Second, a solid industry rank and then, a Momentum Style Score of B or better and a Growth Style Score of B or better. This is quite a combination to look out for in stocks, especially for investors beefing up their portfolio in the second half given volatility and uncertainty. Take a quick look at the best 1H2015 stocks and their key metrics in the table below:
 

Clearly, stocks in the health care, computer and technology, and consumer discretionary spaces have outperformed per our criteria and could remain the three front-runners through the second half of the year. We look a little deeper into the winning factors of these top sectors:

Health Care Riding High on Crazy M&A, Obamacare

The health care sector has been on the hot list in terms of the merger and acquisition (M&A) frenzy this year. The endless hunt for new drugs, expanding market share and cost cutting efforts are pushing the companies to combine.

Along with this, an aging population, growing middle class, strong earnings and the Affordable Care Act (Obamacare) are driving the stocks higher. In particular, Obamacare has expanded health care coverage to millions of Americans without insurance and is pumping up the revenues and profits of biotech and pharma companies as well as managed care providers.

While there are number of health care stocks that have outperformed, Anthera Pharmaceuticals (ANTH - Snapshot Report), Anacor Pharmaceuticals (ANAC - Snapshot Report) and INSYS Therapeutics (INSY - Snapshot Report) make for a compelling choice with Momentum and Growth Style Score of ‘A’ each coupled with the Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Technology Surging on Growing Emerging Demand

A number of industries in the broad computer and technology space have continued to show immense strength this year as economically sensitive sectors like technology generally picks up in an expanding economic cycle. Most of these tech companies are sitting on a huge pile of cash, which ensures that these are not plagued by financial troubles even in a rising interest rate environment.  

In particular, the semiconductor space has been the fastest growing segment of the technology sector with stocks like NeoPhotonics NPTN) and Ambarella (AMBA - Snapshot Report) returning 160% and 100%, respectively, so far this year. While this is true, growing demand for emerging technologies such as cloud computing, big data, cyber security and the Internet of Things has made CyberArk (CYBR - Snapshot Report) an exciting choice for the second half. This stock has a Zacks Rank #2, Momentum Style Score of ‘A’ and Growth Style Score of ‘B.’

Consumer Discretionary Enjoying Healthy Economy

With a pickup in economic activities after the first-quarter slump, the consumer discretionary sector made an impressive comeback in the latter half of the January to June period. Strong performances was credited to higher retail sales, robust job growth, stabilizing manufacturing activity, renewed optimism in the housing market, rising consumer confidence, and resurgence in consumer spending, which accounts for more than two-thirds of U.S. economic activity.    

The latest consumer sentiment survey by the University of Michigan has been extremely positive with the monthly Consumer Confidence Index climbing to the five-month high to 96.1 in June from 90.7 in May. The bullish trend is likely to continue in the coming months and give a boost to the consumer stocks in various corners like Nintendo Co. (NTDOY - Snapshot Report), Diplomat Pharmacy (DPLO - Snapshot Report) and Oxford Industries (OXM - Snapshot Report).

Bottom Line

Given the increased confidence in the U.S. economy as well as a slower-than-expected Fed rate hike path, the stock market should continue to surge for the rest of the year. Our choice of stocks will also, hopefully, be high fliers with above-market returns in the second half.