Equity Strategies Group-Level Analysis Of The Equity Markets
GS Scores Identify Successful Equity Themes In 2021
The Group Selection (GS) Scores are off to a fantastic start in 2021, and the Select Industries strategy, which takes its cues from the Attractive range, has taken full advantage.
Housing-Related Groups Top The Rankings
Housing-related groups have catapulted to the very top of our rankings. Several of these are among the top-ten performers of our 120-group universe. Despite the strong returns for these industries, our GS Scores indicate that this theme has even more room to run.
Sector Rankings
Financials remains at the top, and Materials strengthened to #2 (it ranked #6 as recently as March). Consumer Discretionary moved back up to 3rd place. Info Tech dropped to 4th—the first time it has ranked below the top-three since October 2019. Health Care continued its trend of deterioration and is now the eighth-lowest-rated of the eleven broad sectors. Energy, Real Estate, and Utilities are the three-worst-ranked sectors—a distinction they have now maintained for roughly a year.
“Change In Equity Shares Outstanding Factor” Surprises In 2020
Historically, companies that have grown their equity share base over the previous year are apt to underperform the broad market in the ensuing months; those that had reduced shares outstanding tend to outperform. However, the opposite happened over the course of the last year. Here we explore the underlying details to see what contributed to this result.
Sector Rankings
Financials and Information Technology remained in the top-two spots this month, with Materials moving up from 6th to displace Consumer Discretionary as the 3rd highest rated. Health Care logged the biggest drop in the ratings, moving from 4th down to 7th. Energy, Real Estate, and Utilities maintained their status quo as the three-worst-ranked sectors—now approaching almost a full year at the bottom.
The Discretionary Divide—An Earnings-Season Update
We revisit the great divide that has emerged between companies and entire industries over the course of the past year. The fragmentation is, of course, the result of companies/industries that benefited from the pandemic environment, and those that were adversely affected.
Sector Rankings
The top-rated sectors are unchanged this month, with Financials, Information Technology, and Consumer Discretionary rounding out the top-three spots. Health Care moved up from the 6th rank to 4th. Consumer Staples logged the biggest drop in the ratings, moving from 5th spot to 7th this month. Energy, Real Estate, and Utilities maintained their status quo as the three-worst-ranked sectors—now tallying the tenth-consecutive month at the bottom.
Homebuilding Holds Steady At The Top Of GS Scores
As new home sales skyrocket alongside plummeting mortgage rates, we revisit the historical relationship between Homebuilding stock returns and industry-specific factors that impact housing affordability and homebuilders’ bottom lines.
Sector Rankings
Financials jumped from 5th place to 1st this month—the first time Financials has been the highest-rated since February 2020. Information Technology, Consumer Discretionary, and Communication Services round out the top.
Industry “Dreams” And “Nightmares”
We take a look at our historical analysis of industry-group portfolios to see how the “Dreams” and “Nightmares” from 2019 fared in 2020. The industry-group composition of the 2020 Dream and Nightmare portfolios is also presented.
Revisiting The “Reopening Economy” Theme
We review relative price-action patterns among industry groups belonging to the “reopening economy” theme. These are areas that have been hit hard by the pandemic and should benefit the most from a return to economic normalcy. Conversely, a variety of industries profit on days when it appears that the economic shutdown may be prolonged. Recent performance is incorporated to re-examine the trends.
Sector Rankings
We saw only slight movement among the sector rankings. Health Care, Information Technology, and Consumer Discretionary remained the top-three rated sectors (out of eleven total). The biggest movers this month were (1) Financials moving from the 8th spot to 6th, and (2) Industrials swapping from 6th to 8th. The bottom-three rated sectors, Real Estate, Energy, and Utilities are the same as last month, with Energy returning to the bottom.
The Stock Market & U.S. Presidential Election Cycle Revisited
We crunch some numbers to see how 2020’s stock market trends have fared compared to the typical election year, and we slice and dice past post-election year trends at the sector and industry group levels to look at potential opportunities in the coming year.
Sector Rankings
There continues to be little movement among the sector rankings. While Health Care, Information Technology, and Consumer Discretionary remained the top-three rated sectors (out of eleven total), Consumer Staples and Communication Services swapped spots this month and moved into 4th and 5th, respectively. The bottom-three rated sectors, Real Estate, Energy, and Utilities are the same as last month, with Energy returning to the bottom.
Examining The “Reopening Economy” Theme At The Group Level
We examine a variety of industry groups with noteworthy relative price action on both “reopening” and “closed economy” days. Our objective is to shed more light on the industry groups that are consistently moving together on these days.
Sector Rankings
There was little movement among the sector rankings. While Health Care and Information Technology remained the top-two rated sectors (out of eleven total), Consumer Discretionary jumped to the 3rd spot from 5th. Communication Services and Consumer Staples each dropped one position to move into 4th and 5th place, respectively. The bottom-three rated sectors, Real Estate, Energy, and Utilities are unchanged.
“Reliable” Health Care And The Presidential Election
Health Care has been resilient this year, but will that continue in the run-up to the presidential election? We look at the performance of the Attractively-ranked industry groups and how they have historically performed leading up to an election and post-election.
Sector Rankings
There was some movement among the sector rankings. While Health Care, Information Technology, and Communication Services remained the top-three rated sectors (out of eleven total), Consumer Staples advanced to the 4th spot from 6th and Financials dropped to the 8th position from 5th. The bottom-three rated sectors, Real Estate, Energy, and Utilities are the same as last month.
Housing Groups Heat Up
A major driver of the division in recent performance among retail groups has been the burgeoning “nesting” theme. Stuck at home, consumers are directing their dollars toward indoor and outdoor home upgrades. A related theme has now established itself in the upper rankings of our group work—Housing.
Sector Rankings With Attractive/High Neutral And Unattractive Industry Groups
There was no movement among the sector rankings. Health Care, Communication Services, and Information Technology are the top-three rated sectors (out of eleven total). The bottom-three rated sectors are Real Estate, Energy, and Utilities.