Monday, June 28, 2010

Not dead yet

I've been on the road this weekend, bringing my sons to visit their grand-dad and celebrate his 89th birthday. As a result, posting has been slim over the last few days but I wanted to provide these charts for your consideration as an alternative to the pervasive bearishness that has been out there lately

In the chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 6400 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).


This chart shows that the market took a body blow last week but is still standing. Last week I wrote that the market was surely going to move up based on the pattern emerging on this chart where the yellow line (number of stocks above their 50-DMA) had moved decisively above the magenta line (number of stocks whose 20-DMA is above their 50-DMA). The yellow line has taken a step back but is still well above the magenta line. Furthermore, the magenta line has held in place. This, to me, suggests there is still some underlying strength in this market.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.


Last week's action essentially stopped this chart in its tracks. Whereas the previous weeks had seen some very nice improvements in the number of stocks that were showing strong up-trends, this past week showed a slight decline. The good news, however, is that the decline was merely slight despite the fact that stocks had a pretty rough week with most averages falling more than 3%.

Conclusion --

This coming week, stocks will be hostage to employment reports. Wednesday comes the ADP employment report, Thursday is initial claims and Friday the big Nonfarm Payrolls report. Expectations are low for all of these reports so any glimmer of hope related to jobs could serve to further strengthen support for stocks.

Technically speaking, stocks stubbornly keep from establishing new lows while cycling above and below the 200-day moving averages. It makes this market a nail-biter. Nevertheless, I can't quite embrace the bear case. I would not be surprised by a  move to the upside.



Thursday, June 24, 2010

May Durable Goods -- Tech wavers but the trend is still up

The Advanced Report on Durable Goods for May was released today and it didn't do much to keep the market from continuing its single-minded decline.

The headline number for May was not what investors were looking for (New Orders decreased 1.1%) but many analysts pointed out that ex-transportation, the overall number for new orders actually increased 0.9%.

As I always do, I will focus on the tech sector. The numbers were mixed but, with one exception, not bad at all.

Shipments --

Many analysts give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. In other words, ancient history. The following chart shows how May shipments look for the overall tech sector:


The chart shows a downturn in May but so far it just looks like a repetition of an ongoing pattern: big jump up followed by two months of small declines leading to a solid up-trend. So far, there is no reason to be alarmed. 

New Orders --

The forward looking measure that Wall Street gives the most credence to is the New Orders number. The following chart shows New Orders for the tech sector:


The chart shows May's New Orders barely showing any improvement. The next two charts show why.

The first of these two charts shows the category of Computers and Related Products. New Orders increased 2.5% in May.


 So far, so good. The second of these two charts shows where the problem lies. This last chart shows New Orders for Communications Equipment.



Here we see a chart that is in an unrelenting down-trend. The result is that the underperformance of Communication Equipment category is beginning to impact the rest of the tech sector. Looking at the value of new orders (left axis), this category appears to be roughly 20% of the overall tech sector.

Conclusion --

Tech is showing some slowdown but so far there are no signs that the up-trend currently in place has actually come to an end. With the market the way it is these days, however, it is hard to advise buying tech or anything else. Still, if the up-trend in orders and shipments continues, the current period will surely end up looking like a great buying opportunity. Are you brave enough to take that opportunity?



Wednesday, June 23, 2010

Humana tops our "reasonable value" list with some deep, deep value characteristics

After running Tuesday's Alert HQ process I checked my "Reasonable Value" screen against the day's Trend Leaders. For those of you who have not see one of my previous "Reasonable Value" posts, here are the criteria for the screen:

  • PE between 0 and 20
  • PEG between 0 and 1.3
  • Price-to-Sales less than 2
  • Debt-to-Equity less than 1
As Trend Leaders, each of these stocks is showing good up-trend performance according to MACD, Wilder's DMI and Aroon analysis. Today's list consists of the following four stocks:

Symbol Name Last Price Market Cap PE PEG Price-
To-
Sales
Price-
To-
Book
Debt-
To-
Equity
Cash Flow Yield Cash On Hand EV
-to-
EBITDA
DINE Rewards Network, Inc. $14.11 $124M 18 1.07 1.57 1.44 0 3.9% $14.5M 6.7
ENDP Endo Pharma-ceuticals Holdings Inc. $22.31 $2.6B 8 0.62 1.71 1.66 0.21 16.5% $848M 4.39
SKX Skechers U.S.A., Inc. $41.35 $1.9B 19. 0.83 1.26 2.44 0 3.4% $325M 10.42
HUM Humana Inc. $48.41 $8.2B 7 0.96 0.27 1.38 0.27 34% $8.5B 0.82

I had trouble squeezing the table into this post because I've added a couple of columns. Let's start with the column containing the ratio of EnterpriseValue-to-EBITDA, otherwise known as enterprise multiple. When this value is roughly around 6 or lower, it indicates a stock that is undervalued. By this measure, then, Sketchers begins to look less like a value stock. On the other hand, Humana looks like the deepest of deep value stocks.

I've also included Cash Flow Yield this time. All the companies look decent on this measure but now Endo Pharaceuticals and Humana stand out with very attractive numbers. Furthermore, Humana's CFY is more than twice that of Endo Pharaceuticals.

Finally, we have the Cash on Hand column. The definition I use here is Cash + Short Term Investments. According to Google Finance, Humana has  $8.5 billion in cash. Oddly, Yahoo Finance has the same number on their Key Statistics page but when looking at the Balance Sheet for the most recent quarter, Yahoo lists no Short Term Investments and thus a cash level of only $1.8 billion. So I'm not sure which number is right but consider the following: if Humana has the higher cash level, then you can buy the company for only slightly more than the cash on its books. You would get the rest of the company as a going concern for almost free. That would be value indeed.

Looking at today's list of reasonable value stocks, Humana seems to be the clear winner. These numbers beg the question, though, of why the stock should be so undervalued. Here are some factors that may have pressured the stock:
  • The latest quarter included a net 33 cents of gains from a reserve reversal. This is a good sign in that the reserve is no longer needed but it is a bit of a gimmick in terms of the effect on the income statement and a cheesy way to "make its numbers".
  • The commercial segment remains under pressure due to the high rate of unemployment and the shaky economic situation. Companies are unwilling to add health benefits and layoffs have reduced the ranks of the insured.
  • The commercial segment's pretax earnings increased 8% on the reserve mentioned above gain but enrollment fell 4% from a year earlier and 2.3% during the quarter. Losing customers is never a good sign.
  • The health care bill is now law and there are some analysts who feel that it will negatively impact Humana's participation in Medicare Advantage programs
Much of the negativity around the stock, therefore, is largely a function of the economic downturn. If you have a bullish outlook on the U.S. economy, this stock looks really ripe for a BUY. If you are downbeat on the U.S., the stock is still probably a HOLD since it's deep value characteristics suggest there shouldn't be much downside potential.

In any case, after peaking in February, the stock seemed to be consolidating and has now been moving strongly upward for the last 5 weeks.


The chart above shows that the criteria we use to designate a company a Trend Leader are all present: MACD, Wilder's DMI and Aroon are all still bullish. It does look, however, that these indicators are weakening. Does that mean a buying opportunity or further breakdown? You be the judge.

Disclosure: no positions in any companies mentioned in this post



Monday, June 21, 2010

Weekly ProShares review -- bulls still at work but enthusiasm has waned

For the last couple of weeks I have been presenting a list of the ProShares ETFs that had exhibited the strongest performance over the course of the last week. I received a number of comments over at Seeking Alpha requesting that I do it again but I haven't had much reaction since then. If you find this useful please leave a comment and let me know!

A short recap on  leveraged ETFs and why I look at them --

The ProShares leveraged ETFs are primarily short-term trading vehicles and, as such, they can be viewed as indicators of short-term sentiment.

Since these ETFs come in so many styles and sectors, looking at the leaders among them can paint a picture of those areas of the market in which short-term investors are currently most interested.

The following table lists those members of the ProShares family that have turned in the best performance over the course of the last week (the period from last Tuesday through this Monday). The last two weeks the criteria included any ETF with double-digit gains. This week there's only one ETF in that category so we have included all those ETFs with a 5% gain or more.

Note also that I compare this week's average volume to the previous week's average volume. Increased volume may confirm increase in price as an indicator of a move with staying power.

Symbol Fund Name Group Objective Percent Change - Price Percent Change - Avg Volume
XPP Ultra FTSE/Xinhua China 25 Ultra 200% of the underlying 10.1% -9.2%
EET Ultra MSCI Emerging Markets Ultra 200% of the underlying 7.8% 16.4%
UYM Ultra Basic Materials Ultra 200% of the underlying 6.6% -24.1%
USD Ultra Semiconductors Ultra 200% of the underlying 6.6% -51.1%
UPRO UltraPro S&P500 Ultra 300% of the underlying 6.3% 7.4%
UXI Ultra Industrials Ultra 200% of the underlying 6.2% 26.2%
DIG Ultra Oil & Gas Ultra 200% of the underlying 6.0% -39.2%
UWC Ultra Russell3000 Ultra 200% of the underlying 5.9% -32.8%
UCO Ultra DJ-UBS Crude Oil Ultra 200% of the underlying 5.8% -16.0%
QLD Ultra QQQ Ultra 200% of the underlying 5.7% -22.0%
UPW Ultra Utilities Ultra 200% of the underlying 5.5% 11.0%
EZJ Ultra MSCI Japan Ultra 200% of the underlying 5.5% -38.5%
EFO Ultra MSCI EAFE Ultra 200% of the underlying 5.4% -13.6%
ROM Ultra Technology Ultra 200% of the underlying 5.3% -32.5%

With the yuan exchange rate news, it's not a surprise to see XPP at the top of our list today. Note, however, that out of the week's 10% gain, almost 7% of that gain came today. In a broader context, EET has also moved up nicely and steadily over the course of the week and the gains came on increasing volume to boot.

Two big themes of the recent bullishness have been Basic Materials and Industrials. We see two ETFs in these sectors continue to occupy spots near the top of this list. UYM gained over 6% but volume was down 24%. On the other hand, UXI also gained over 6% but volume increased this week by 26%. With many economic reports pointing to a real recovery in manufacturing, investors are still jumping into this sector with conviction.

It wouldn't be a Trade Radar post if I didn't touch on the tech sector at some point. Despite mixed outlooks from various analysts on the semiconductor sector, investors are voting with their dollars and USD turned in the fourth best performance this week though volume was down 50%. Similarly QQQ and ROM were both up while volume declined.

Utilities are a typically defensive holding and interestingly  we see that UPW, the Ultra Utilities ETF, advanced this week on an increase in volume.

Conclusion --

Bulls still rule as, once again, all the top ETFs are double long Ultra ETFs this week. Still, the decrease in volume shows investors may be getting skittish with some of the riskiest sectors.

Disclosure: long ROM and USD



Sunday, June 20, 2010

Say what you will about the fundamentals -- this market is going up

OK, I'm well aware of all the fundamental issues facing this market: stubborn unemployment, slowing leading indicators, shaky real estate, the European crisis, etc. Markets, however, have a way of doing what they wish regardless of what may or may not be logical.

This post looks at the market as it is, not as is should be, and I'm convinced stocks are going up. 

Our first piece of evidence is this list of all of this weekend's stock market BUY and SELL signals available at Alert HQ. Taken together, this is a picture of an improving market.

This weekend we have the following stock picks and signals:

  • Reversal Alerts based on daily data, we have 99 Alert HQ BUY signals and 3 SELL signals
  • Reversal Alerts based on weekly data, we have 3 Alert HQ BUY signal and 25 SELL signals
  • We have 64 Bollinger Band Breakouts based on daily data and 40 are bullish. We also have 108 Breakouts based on weekly data and 53 of them are bearish.
  • We have 664 Cash Flow Kings
  • 10 Swing Signals --  9 are BUY signals and only one is a SELL signal
  • 223 Trend Leaders, all in strong up-trends according to Aroon, MACD and DMI. We have 69 stocks that are new additions to the list and 34 that fell off the previous list.
  • 94 Trend Busters based on daily data of which all but three are BUY signals. We also have 330 Trend Busters based on weekly data  but in this case only 3 are BUY signals.
  • 129 Gap Signals -- stocks with upside or downside gaps or gaps that have been closed. We see 52 downside gaps and 77 upside gaps based on daily data. We also have 41 Gap Signals based on weekly data or which 16 are bearish.
The view from Alert HQ --
 
Except for the reversal signals based on weekly data, pretty much every list of stock picks looks bullish. The Trend Leaders list is growing nicely week-over-week, the Trend Busters, Gaps, Swing Signals and Bollinger Band Breakouts all show more BUY signals than SELL signals. The reversal signals based on daily data are improving so strongly that it indicates the beginnings of a real bullish move. The consistency of the bullish bias across all our stock screens cannot be ignored.

As part of the Alert HQ process we summarize and track a number indicators across the whole universe of stocks and ETFs that we track and we generate a weekly set of charts. These charts are our second piece of evidence.

In the chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 6400 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).


Last week we saw the first glimmers of hopefulness but we wanted to see some confirmation. This week, I think it's safe to say that confirmation has been delivered. The crossover of the yellow line above the magenta line (in other words, the number of stocks above their 50-DMA has increased above the number of stocks whose 20-DMA is above their 50-DMA) has become definitive and this is something that we generally see with a market starting a real tangible rally.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.


Here we're also seeing a crossover. In this case the red line describing the number of stocks in down-trends has begun to plunge while the yellow line describing the number of stocks in up-trends has finally jumped upward. In terms of trending, then, it appears the tide has turned and more stocks are in up-trends than are in down-trends.

Conclusion --

My intention here is just to describe market action and make an educated guess as to whether the current strengthening in stock prices will continue. From what I'm seeing, it looks like the path of least resistance for this market is UP. Not only are all these Trade-Radar indicators looking quite positive but, in another sign of recovery, major stock market indices have all moved above their 200-day moving averages.

With China's announcement that they will allow more exchange rate flexibility with the yuan, Asian markets are off and running as I write this post. This is bound to provide support for U.S. markets this week which should only serve to further strengthen the technical case for this market continuing to rally.

For now, bears should step aside.
Found a few stock picks you are interested in? If you are looking to refine your entry and exit points, you should take a look at what our friends at Hottinger's E-Zone Signals have to offer.




Saturday, June 19, 2010

Value by Industry -- how do your favorite sectors stack up?

Today I ran a stock screen that looked at the ratio of "Enterprise Value" to "Earnings before Income Taxes, Depreciation and Amortization". This is known more simply as EV-to-EBITDA or the "enterprise multiple" and it is often used a measure of whether a stock is over-valued or not. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include. The lower the enterprise multiple, the greater the potential that the company is under-valued.

For this screen I took the average value of EV-to-EBITDA across each industry and created the following chart. Within the 10 standard sectors we have a total of 201 industries represented.

Sector Industry Average EV-to-EBITDA
Capital Goods Building Materials 107.5
Capital Goods Building Products 95.7
Capital Goods Homebuilding 46.6
Consumer Non-Durables Farming/Seeds/Milling 39.9
Technology Computer Communications Equipment 37.7
Technology Semiconductors 36.5
Capital Goods Biotechnology: Laboratory Analytical Instruments 34.6
Consumer Services Consumer Specialties 32.4
Health Care Ophthalmic Goods 31.3
Consumer Non-Durables Environmental Services 30.6
Finance Real Estate 29.3
Capital Goods Electrical Products 28.5
Health Care Biotechnology: Biological Products (No Diagnostic Substances) 28.2
Consumer Services Hotels/Resorts 27.8
Consumer Services Building operators 27.5
Technology Industrial Machinery/Components 27.3
Technology Computer Software: Prepackaged Software 27.1
Energy Industrial Machinery/Components 27.0
Energy Oilfield Services/Equipment 25.0
Finance Investment Managers 24.8
Basic Industries Forest Products 23.6
Consumer Durables Diversified Electronic Products 23.1
Finance Finance/Investors Services 21.0
Consumer Services Television Services 21.0
Energy Oil & Gas Production 20.9
Consumer Services Advertising 20.8
Technology Radio And Television Broadcasting And Communications Equipment 20.7
Health Care Medical/Dental Instruments 20.3
Basic Industries Precious Metals 20.1
Consumer Non-Durables Motor Vehicles 19.3
Basic Industries Steel/Iron Ore 18.5
Energy Integrated oil Companies 17.7
Capital Goods Construction/Ag Equipment/Trucks 17.2
Technology Professional Services 17.1
Consumer Services Real Estate Investment Trusts 16.6
Technology EDP Services 16.5
Consumer Non-Durables Consumer Specialties 16.4
Health Care Biotechnology: In Vitro & In Vivo Diagnostic Substances 16.3
Capital Goods Ordnance And Accessories 16.2
Transportation Oil Refining/Marketing 16.1
Miscellaneous Business Services 16.0
Capital Goods Pollution Control Equipment 15.8
Technology Diversified Commercial Services 15.8
Technology Advertising 15.6
Technology Electronic Components 15.4
Consumer Services Catalog/Specialty Distribution 15.4
Miscellaneous Multi-Sector Companies 15.3
Technology Computer peripheral equipment 15.1
Basic Industries Major Chemicals 15.0
Consumer Services Real Estate 14.9
Consumer Services Movies/Entertainment 14.8
Capital Goods Railroads 14.6
Consumer Durables Home Furnishings 14.5
Capital Goods Metal Fabrications 14.4
Technology Computer Software: Programming, Data Processing 14.4
Consumer Durables Major Pharmaceuticals 14.0
Finance Diversified Commercial Services 13.9
Capital Goods Industrial Machinery/Components 13.7
Energy Consumer Electronics/Appliances 13.7
Consumer Non-Durables Recreational Products/Toys 13.6
Health Care Biotechnology: Electromedical & Electrotherapeutic Apparatus 13.3
Public Utilities Natural Gas Distribution 13.2
Technology Computer Manufacturing 13.2
Basic Industries Aluminum 12.8
Consumer Services Home Furnishings 12.8
Consumer Non-Durables Consumer Electronics/Appliances 12.7
Basic Industries Engineering & Construction 12.6
Consumer Non-Durables Packaged Foods 12.5
Energy Natural Gas Distribution 12.3
Capital Goods Auto Manufacturing 12.2
Transportation Railroads 12.0
Consumer Services Broadcasting 11.8
Consumer Services Diversified Commercial Services 11.8
Consumer Services Transportation Services 11.8
Consumer Services Consumer Electronics/Video Chains 11.7
Technology Retail: Computer Software & Peripheral Equipment 11.7
Miscellaneous Office Equipment/Supplies/Services 11.7
Consumer Services Other Consumer Services 11.6
Consumer Non-Durables Beverages (Production/Distribution) 11.6
Consumer Durables Publishing 11.4
Consumer Durables Industrial Specialties 11.4
Capital Goods Steel/Iron Ore 11.4
Basic Industries Metal Fabrications 11.4
Consumer Services Military/Government/Technical 11.3
Consumer Durables Telecommunications Equipment 11.3
Finance Finance: Consumer Services 11.3
Consumer Durables Specialty Chemicals 11.3
Consumer Non-Durables Meat/Poultry/Fish 11.2
Consumer Services Marine Transportation 11.0
Energy Metal Fabrications 10.9
Basic Industries Mining & Quarrying of Nonmetallic Minerals (No Fuels) 10.9
Consumer Durables Metal Fabrications 10.9
Consumer Durables Consumer Electronics/Appliances 10.9
Health Care Industrial Specialties 10.9
Health Care Medical Specialities 10.8
Miscellaneous Other Consumer Services 10.7
Consumer Services RETAIL: Building Materials 10.6
Consumer Services Paper 10.6
Miscellaneous Industrial Machinery/Components 10.6
Consumer Non-Durables Homebuilding 10.6
Basic Industries Miscellaneous 10.5
Public Utilities Water Supply 10.4
Capital Goods Tools/Hardware 10.4
Consumer Services Rental/Leasing Companies 10.4
Basic Industries Agricultural Chemicals 10.3
Capital Goods Electronic Components 10.3
Consumer Non-Durables Telecommunications Equipment 10.3
Consumer Durables Miscellaneous manufacturing industries 10.2
Health Care Precision Instruments 10.2
Consumer Durables Industrial Machinery/Components 10.1
Miscellaneous Home Furnishings 10.1
Consumer Services Automotive Aftermarket 10.1
Consumer Services Professional Services 10.1
Energy Electric Utilities: Central 10.0
Consumer Services Recreational Products/Toys 10.0
Capital Goods Aerospace 10.0
Health Care Hospital/Nursing Management 9.9
Consumer Non-Durables Food Chains 9.8
Consumer Services Services-Misc. Amusement & Recreation 9.7
Health Care Medical/Nursing Services 9.7
Consumer Durables Office Equipment/Supplies/Services 9.7
Transportation Air Freight/Delivery Services 9.7
Transportation Marine Transportation 9.7
Capital Goods Industrial Specialties 9.6
Consumer Non-Durables Electronic Components 9.6
Consumer Non-Durables Specialty Foods 9.6
Basic Industries Specialty Chemicals 9.6
Transportation Aerospace 9.6
Capital Goods Auto Parts:O.E.M. 9.5
Capital Goods Medical Specialities 9.5
Consumer Services Telecommunications Equipment 9.5
Capital Goods Specialty Chemicals 9.5
Consumer Non-Durables Apparel 9.5
Consumer Services Clothing/Shoe/Accessory Stores 9.5
Basic Industries Homebuilding 9.4
Basic Industries Telecommunications Equipment 9.4
Energy Oil Refining/Marketing 9.4
Capital Goods Automotive Aftermarket 9.4
Consumer Durables Automotive Aftermarket 9.3
Finance Finance Companies 9.2
Consumer Services Motor Vehicles 9.1
Consumer Non-Durables Package Goods/Cosmetics 9.1
Consumer Durables Building Products 9.1
Capital Goods Fluid Controls 9.1
Health Care Biotechnology: Commercial Physical & Biological Resarch 9.1
Basic Industries Environmental Services 9.0
Transportation Trucking Freight/Courier Services 8.9
Basic Industries Package Goods/Cosmetics 8.9
Consumer Services Other Specialty Stores 8.9
Miscellaneous Publishing 8.9
Consumer Non-Durables Shoe Manufacturing 8.9
Consumer Services Newspapers/Magazines 8.6
Capital Goods Containers/Packaging 8.6
Consumer Services Publishing 8.5
Public Utilities Oil/Gas Transmission 8.5
Health Care Other Pharmaceuticals 8.5
Public Utilities Environmental Services 8.4
Basic Industries Electric Utilities: Central 8.3
Consumer Durables Containers/Packaging 8.2
Finance Investment Bankers/Brokers/Service 8.2
Public Utilities Oil & Gas Production 8.2
Public Utilities Power Generation 8.2
Energy Coal Mining 8.1
Public Utilities Electric Utilities: Central 8.1
Health Care Medical Electronics 8.1
Technology Electrical Products 7.9
Consumer Non-Durables Plastic Products 7.8
Consumer Non-Durables Textiles 7.8
Finance Business Services 7.8
Basic Industries Paints/Coatings 7.7
Finance Life Insurance 7.6
Public Utilities Telecommunications Equipment 7.6
Consumer Services Restaurants 7.5
Transportation Other Transportation 7.5
Consumer Durables Steel/Iron Ore 7.5
Basic Industries Paper 7.5
Capital Goods Engineering & Construction 7.5
Capital Goods Military/Government/Technical 7.4
Basic Industries Home Furnishings 7.4
Consumer Services Farming/Seeds/Milling 7.2
Transportation Transportation Services 7.2
Finance Specialty Insurers 7.2
Consumer Durables Consumer Specialties 7.2
Consumer Services Office Equipment/Supplies/Services 7.0
Consumer Services Department/Specialty Retail Stores 6.9
Consumer Non-Durables Food Distributors 6.9
Consumer Services Books 6.8
Consumer Services Food Chains 6.4
Basic Industries Military/Government/Technical 6.4
Finance Property-Casualty Insurers 6.2
Basic Industries Textiles 6.0
Consumer Durables Electrical Products 5.9
Basic Industries Containers/Packaging 5.8
Finance Accident &Health Insurance 5.6
Capital Goods Marine Transportation 5.5
Technology Telecommunications Equipment 5.5
Consumer Durables Paper 5.3
Consumer Services Consumer: Greeting Cards 4.8
Consumer Services Homebuilding 4.1
Consumer Services Electronics Distribution 3.7
Basic Industries General Bldg Contractors - Nonresidential Bldgs 3.6

One interesting thing that jumps out at me is how the General Bldg Contractors - Nonresidential Bldgs industry is at the bottom of the list where the deepest value industries are found. But at the top of the list, where the most over-valued industries are, we see Building Materials and Building Products. It seems odd that the these industries would be at the opposite end of the spectrum. And then there's Homebuilding. With it's position way at the over-valued end of the list, it seems like residential construction is garnering much more investor enthusiasm than it deserves while commercial real estate is perhaps getting much less than it deserves. Indeed, REITs are less over-valued that those companies in the Real Estate industry. In any case, there seem to be some imbalances in investor perception in these industries.

Another over-valued industry is Semiconductors. As this is one of my favorite areas for investment, this gives me pause. On the other hand, semis are generally perceived to be growth stocks so I would expect them to score poorly on a screen like this but not as poorly as they are doing here.

So if you are a value investor, this list could give you a good jumping off point for focusing on attractive industries and avoiding over-valued industries.

Note: If you are interested in which companies are in which industry, here is a link to the NASDAQ web site that will allow you to download lists of companies on the NYSE, the NASDAQ and the AMEX: http://www.nasdaq.com/screening/company-list.aspx. Included in the data is the sector and industry of which each company is a member. Download the CSV files and open them in an Excel spreadsheet and all the data will be right there.




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Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.




 
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