L.A. stocks rallied in 2012, with homebuilding and entertainment-media companies racking up impressive gains.

Near the top of the list of gainers for the year were L.A.’s two large homebuilders, KB Home and Ryland Group Inc., both more than doubling their share price. Not far behind, film studio Lions Gate Entertainment Corp.’s stock nearly doubled.

Meanwhile, oil giant Occidental Petroleum Corp. was one of only a handful of large cap stocks that fell as the value of commodity-related companies declined this year.

Overall, the LABJ Stock Index – which is made up of the stocks of companies headquartered in Los Angeles County and Conejo Valley – rose almost 14 percent in 2012. Nearly two-thirds of the 167 stocks on the index posted gains for the year. That marks a sharp turnaround from a 5 percent drop in 2011, when more than two-thirds of stocks lost ground.

“L.A. stocks regained their footing in 2012 and trended up,” said Ed Wedbush, president of Wedbush Morgan Securities Inc. in downtown Los Angeles.

The 14 percent jump in L.A. stocks was largely in line with the rally in the broader markets. The S&P 500 was up 14 percent through Dec. 19, while the Nasdaq rose nearly 17 percent. The Dow Jones industrial average lagged, rising 8.5 percent.

These gains came despite a steady drumbeat of problematic economic news, including the European debt crisis and political stalemate in Washington, D.C., amid a contentious presidential election. Most recently, concern has spread about higher taxes and spending cutbacks that could be triggered starting next month if the “fiscal cliff” negotiations falter.

But these downbeat trends masked a broader improvement in the national economy and in the bottom lines of many companies, both nationally and in the L.A. area. That in turn has helped spur the stocks of many of L.A.’s publicly traded companies.

Some industries did better than others. Media-entertainment and homebuilding companies did very well, while commodity-related companies fared poorly.

“Los Angeles is well-represented in the sectors that were stronger over the past year, including media and entertainment, homebuilding and technology,” said Bryant Riley, chairman of B. Riley & Co. in West Los Angeles. “Fortunately, L.A. doesn’t have that many of the commodity companies that underperformed this year.”

Homebuilder boom

Near the top of the gainers list were KB Home of Westwood, which jumped 148 percent to $16.66, and Ryland Group of Westlake Village, which came in close behind at 136 percent and closing at $37.19 on Dec. 19.

Both companies have benefited from a nascent recovery in the nation’s housing market after four down years when homebuilding ground to a halt. With the employment picture slowly improving this year and foreclosures in many parts of the country finally winding down, more people have started to buy new homes.

According to a recent report from housing analyst Buck Horne at Raymond James & Associates Inc. of St. Petersburg, Fla., homebuilder stocks had surged 82 percent through October as orders for new homes and housing starts steadily grew throughout the year.

Hit films

It’s also been a great year for investors in many of L.A.’s media and entertainment companies. Santa Monica film studio Lions Gate Entertainment rose 90 percent for 2012, closing at $15.85 on Dec. 19. A Bloomberg comparative analysis showed that companies in Lions Gate’s category averaged a 40 percent gain this year.

The studio had a record 2012 at the box office, with a string of hits including “The Hunger Games” and “Twilight: Breaking Dawn 2.”

According to media and entertainment analyst James Marsh at Piper Jaffray in New York, the fourth quarter alone contained a “number of surprises to the upside: ‘Skyfall,’ ‘Argo,’ ‘Taken 2’ and ‘Wreck-It-Ralph.’…This fourth quarter bonanza should deliver a record 2012 box office.” Lions Gate either produced or had distribution partnerships in those films.

Media and entertainment behemoth Walt Disney Co. of Burbank – L.A.’s largest publicly traded company by market capitalization – turned in a respectable 33 percent share price gain, due in large part to demand for its ESPN cable network and other cable properties, as well as robust theme park performance.

Small cap leaders

Two small cap companies were at the top of this year’s list of share price gainers: Sequential Brands Group Inc. and Reed’s Inc., both of Los Angeles. Apparel licensor Sequential Brands shares rose 536 percent to $5.25, largely because of a reverse stock split back in February. In many reverse stock splits, shares tend to drift back down afterward, but Sequential Brands has actually gained ground since. That’s because the company also changed its business model, from a jeans maker known as People’s Liberation to a licensor of apparel brands.

“The change in business model has been well-received by the market,” said Paul Zaffaroni, director of the consumer and business services investment banking group at Roth Capital Partners in Newport Beach.

Meanwhile, beverage company Reed’s reported its first-ever profitable quarter this past summer. And it’s now riding a wave of popularity with its latest beverage, kombucha, a probiotic drink. As a result, its stock has soared nearly 400 percent this year to $5.52.

Losing stocks

Among large cap companies, Occidental Petroleum of Westwood was one of the worst performers as its shares fell almost 17 percent on the year, closing at $78.24 on Dec. 19. The main culprit: lower oil prices. Unlike most of the other major oil companies, Occidental only does exploration and production; it has no refining operations. So it’s more susceptible to swings in the price of oil; the spot price for West Texas crude has fallen from $99 a barrel last December to about $88 last week.

But Occidental has also faced other issues that have driven its stock price down further than the industry average of 5 percent. The company has staked a major part of its future exploration and production efforts here in California and, so far, that strategy has come up short.

“The results from its shale drilling program in California have been lackluster and cost pressures have mounted,” said Pavel Molchanov, analyst with the Houston office of Raymond James.

2013 outlook

Coming off an unexpectedly positive performance in 2012, can L.A. stocks continue their momentum in 2013?

Investment banker Wedbush doesn’t think so, saying it’s inevitable that some taxes will go up as a result of any agreements reached in fiscal cliff negotiations, particularly capital gains taxes. With less cash on hand, investors won’t be buying as many stocks.

“People in high tax brackets are going to get hit with higher taxes and that’s not good for the investing environment,” he said.

He added that he expects more volatility in the equity markets next year.

But Bryant Riley said that he expects the markets to stay positive next year, adding that investors will eventually adjust to the new reality once the fiscal cliff issue is resolved.

“Companies can only sit on billions of dollars in cash at virtually no return for so long,” he said. “The more time that goes by, the more comfort that businesses get in the economy, the more that cash will be put to use in other areas, such as share buybacks, and mergers and acquisitions.”