Equity Strategies Group-Level Analysis Of The Equity Markets
A Prehistory Of The Communication Services Sector
The new GICS Communication Services sector being introduced late-September will include members that add considerable buoyancy to the growth rates and valuation ratios of this traditionally defensive, high yield, slow growth industry. As a newly-invented sector, Communication Services has no financial history, and we felt it was important to fill that void.
A Phoenix Rises: The New Communication Services Sector
Herein we include an executive summary previewing our forthcoming, in-depth special report on September’s GICS sector changes. The full report, “A Prehistory of the Communication Services Sector” will be distributed soon.
Sector Rankings
Following a seven-month stint as the highest-rated sector overall, Consumer Discretionary relinquished the throne to Health Care.
Attractively-Rated “Movies & Entertainment & Broadcasting” Group
Movies & Entertainment & Broadcasting’s Group Selection (GS) Score has been steadily improving of late; it rose to High Neutral in March and pushed up to Attractive two months ago. Currently a member of the Consumer Discretionary sector, this is a less-correlated option to the many retail industries also currently ranking strongly among the Discretionary components.
GS Score Sector Rankings With Attractive & Unattractive Rated Industry Groups
Consumer Discretionary can’t be topped; it has held on to the highest-rated spot for seven consecutive months. Utilities and Telecom continue to close out the bottom two.
Discretionary Defies Gravity; Dept. Stores Purchased
Brick-and-mortar retail, not to mention antiquated Department Stores, have pretty much been declared dead in the age of Amazon. Often, this is when our GS Scores shine brightest... by picking industries that, at the time, are not intuitive and hard to stomach.
Sector Rankings
Consumer Discretionary has held on to the highest-rated spot for six consecutive months. Coming in last (again) is Utilities. After rating among the lowest two positions between April 2017 and April 2018, Energy finally improved and now sits in 6th place—the middle of the pack.
Transports Gain Momentum Amidst Struggling Industrials Sector; Railroads Purchased
Despite Industrials’ underperformance versus the broad equity market, the sector’s Transportation subset has been on the rise recently. In the latest round of our Group Selection (GS) Scores, four of the five Transportation groups rank Attractive, and the fifth one is rated High Neutral.
Consumer Discretionary Holds At #1
This year we’ve written several notes surrounding the Consumer Discretionary sector’s prominence among our top Group Selection (GS) Scores. This pattern persisted for a fifth consecutive month in April.
Highlighted Attractive Groups
Consumer Discretionary is the highest-rated sector for the fifth consecutive month; Info Tech and Financials have been trading places between #2 and #3 for five months. Coming in last (again) is Utilities.
Health Care Facilities Purchased In Select Industries
YTD, out of the 110 industries, HC Facilities is the fourth best performing group
Highlighted Attractive Groups
Air Freight & Logistics is now Attractive for the first time in two years; Managed Health Care has scored in the top tier dating back to 2009; Trading Companies/Distributors provides an option with oil exposure at a time when the GS Scores remain decidedly anti-oil overall.
Discretionary Reigns: Hotels & Leisure Revisited
The Consumer Discretionary index has also managed to outperform the S&P 500 by about 100 bps since the market’s January 26th peak, and in late March it was just a hair away from surpassing its previous relative strength performance high recorded in late 2015.
Highted Attractive Groups
Department Stores have rallied the last four months; Health Care Distributors is one of the cheapest groups we track; Paper & Forest Products is the only Materials group in the Attractive range of the GS Scores.
Health Care Services Purchased In Select Industries
Our Group Selection (GS) Scores ranked Health Care as one of the top two sectors for a majority of 2011-2015; sector relative strength soared over that period.
Highlighted Attractive Groups
Airlines rebounded after a brief dip to High Neutral; Health Care Distributors is scoring well across the board (other than Technical factors); Specialty Stores is cheap due to the changing retail landscape.
GS Scores: Industrial Metals Stocks Heating Up
While the Materials sector overall still isn’t looking stellar based on our work, we think with the Metals theme heating up, it’s a trend worth watching.
Consumer Discretionary Back On Top
Of the 110 industries in our framework, the top seven are all Consumer Discretionary.
Highlighted Attractive Groups
Asset Management & Custody Banks, General Merchandise Stores, and Hotels & Leisure are among the month’s intriguing opportunities based on the current GS Scores.
HR & Employment Services—A Qualified Candidate
Defying the industrials sector slump.
Highlighted Attractive Groups
Info Tech, Consumer Discretionary, and Health Care are the top-three rated sectors; Energy, Utilities, and Telecom comprise the bottom of the ranks.
Homebuilding Stocks—Still Time To Buy?
Homebuilding Stocks Are On A Stellar Run—Can The Streak Continue?
Highlighted Attractive Groups
Drug Retail, Life Sciences Tools & Services, and Specialized Finance are among the month’s intriguing opportunities based on the current GS Scores.
Autonomous Vehicles: Building A Thematic Group
Rapid growth, coupled with regulatory support, has the potential to bring autonomous vehicles (AV) to the streets sooner than some may anticipate.
Defensive Positioning With Leuthold’s Groups
With the Major Trend Index now in “neutral” territory, and several well-known market strategists urging increased caution and risk awareness, we offer our perspective on defensive investing from the standpoint of our group work.
Highlighted Attractive Groups
Airlines, Life & Health Insurance, and Household Durables are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.
The Investment Merits Of Asset Management Companies
Industry trends and the investment merits of companies involved in the asset management business; we contrast ETF providers with firms involved in traditional active management.
Highlighted Attractive Groups
Auto Parts & Equipment, Hotels & Leisure, and Semiconductor Equipment are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.
Humble Oil
With Energy stocks underperforming the S&P 500 by 20% YTD, contrarian clients are wondering if the sector holds any promise. Here we look for valuation signals that offer encouragement for bargain-hunting investors willing to buy on weakness.
Old School Tech Flies High; Semi Equipment Revisited
Although the glamorous Tech giants have captured investors’ attention of late, from our perspective, the old school, physical Semiconductor plays hold the greatest appeal.
Highlighted Attractive Groups
Home Entertainment Software, Managed Health Care, and Specialized Consumer Services are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.
Highlighted Attractive Groups
Health Care Facilities, Railroads, and Real Estate Management & Development are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.
Dynamics Shift Among Auto-Related Industries
Automotive Retail group takes a backseat while Auto Parts & Equipment takes over the wheel. We examine the market/environmental dynamics that may be causing these groups’ routes to diverge.
Select Highlighted Attractive Groups
Homefurnishing Retail, Property & Casualty, and Technology Distributors are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.
Retail Fades; Other Consumer Themes Flourish
Shifting consumer preferences and the relentless rise of e-commerce are changing the sector’s beneficiaries of the healthy backdrop away from retail, yet other Discretionary opportunities abound outside of the traditional retail groups.
Highlighted Attractive Groups
Automobile Manufacturers, Health Care Distributors, and Homebuilding appear to be solid opportunities based on the current Group Selection Scores.
Financials Remain Atop Sector Rankings
Our Financials Sector Ranking has been strengthening since August—well before the Trump Bump. The addition of Regional Banks to our SI Portfolio boosts our Financials exposure to an overweight 26% versus the S&P 500’s 15% weight. Reinsurance and Developed Diversified Banks are also among the Attractively-rated options for diversification within the sector.
Highlighted Attractive Groups
Automotive Retail improved into the top five rankings; Biotechnology, despite being out of favor, has both long-term growth potential and higher profitability than Pharmaceuticals; Developed Diversified Banks is up almost 20% since the election.