“The stock market looks awful. But maybe people are looking in the wrong place,” wrties E.S. Browning in today’s Wall Street Journal.

“Despite big declines in the most visible market gauges during the past two years — including a 70% plunge since early 2000 for the Nasdaq composite — a huge chunk of the stock market is doing just fine.”

“Nearly half of the stocks on the New York Stock Exchange and the Nasdaq Stock Market have gained ground since late March 2000, according to a study by Birinyi Associates, a research and money-management firm in Westport, Conn. The rising stocks are up a median 53% over that period of more than two years, while the decliners have fallen a median 66%, Birinyi found”

“Many of the stocks that have been holding up surprisingly well were scorned or ignored during the bull market. As these new market leaders quietly emerge from the wreckage of the bust, they offer a potential lifeline for investors who have been burned while waiting for International Business Machines Corp., General Electric Co. or Cisco Systems Inc. to turn around.”

‘You’ve got to get a fresh new line of soldiers in there,’ says John Meara, president of money-management firm Argent Capital Management in St. Louis.”

“The new leaders — stocks with the strongest gains since the market turned down — come from a number of categories. But they have one thing in common: Almost all of them avoided getting caught up in the excesses of the late 1990s. They generally are smaller and less complex than the old leaders, and they trade at a lower price, compared with their earnings. In recent months, some foreign markets also have begun looking like winners, performing better than the U.S. market and causing investors to shift money overseas.”

“The performance of this new group obviously hasn’t turned around the major indicators, such as the Dow Jones Industrial Average or the Nasdaq Composite Index. Both of those are dominated by bigger, better-known U.S. stocks, whose declines statistically outweigh the gains of the generally smaller companies that are doing well. In addition, more people own the big popular stocks that have been suffering than own the smaller, more obscure stocks that have been gaining.”

“So far this year, the big gainers cross a wide range of groups, including home builders, health-care providers, steel companies, clothing makers and restaurants.”

“Nearly 300 stocks have more than doubled in price in the past 12 or 13 months. For example, robust consumer demand has helped auto-parts retailer AutoZone Inc. post strong sales growth. Michaels Stores, which sells home-decorating items, has soared on the back of strong home sales. Owens-Illinois Inc., which makes glass and plastic containers, has benefited from strong profit gains, although it and other economically sensitive stocks have pulled back a bit recently amid fears of an economic slowdown.”