Equity Strategies Group-Level Analysis Of The Equity Markets
Bottom-Fishing In Energy: Beware Of Bankruptcy Risks
New developments have lifted sentiment toward oil and Energy names, but we caution bottom-fishers to be mindful of risks. The fundamentals in the oil patch do not yet support strong oil prices going forward.
Highlighted Attractive Groups
Highlighting Automotive Retail, Education Services and Insurance Brokers.
February GS Score Highlights
The Attractive quintile of the GS Scores became more defensive in nature; the six groups that were downgraded all sported a cyclical business model. The SI portfolio’s Homebuilding group was deactivated after its GS Score strength deteriorated fairly quickly during its disappointingly short tenure.
Homebuilding Group Downgraded And Sold
What initially looked promising fell apart fairly quickly
Revenge Of The Gamers
Despite the already strong performance over the last three years, this group has recession proof attributes, positive industry trends, and widespread areas of potential growth.
Info Tech, Financials, Health Care—Remain Top Three Rated Sectors
Among the bottom ranked sectors are Utilities, Materials, Energy, and Telecom Services. These four sectors have been the bottom four rated sectors for a minimum of eight months.
GS Scores Perform Well In 2015
The Attractive-rated groups outperformed the Unattractive groups by 15.5% in 2015. This is the third positive year in a row, and the best performance differential since 2008.
Financials Strengthen; Regional Banks Purchased
Financials rose in December to rank #1 among sectors for the first time since the start of the financial crisis. In-line with our quantitative disciplines, we added a new Financials group to the Select Industries Portfolio: Regional Banks.
Highlighted Attractive Groups
Groups within Info Tech and Health Care have been long time favorites; the Financials sector also looking more appealing of late. We are still anti-Commodity (for the third straight year).
Construction & Engineering: “Unloved” Opportunity?
After nearly six years, the Industrials sector has reclaimed a top three spot among the GS Score’s Broad Sector Composite rankings—six of the sector’s 18 groups rank Attractive and two are in High Neutral. Construction & Engineering, an Industrials sector group, offers diversity in several ways—from the nature of its underlying businesses, and through areas of strength supporting the GS Score factor categories.
Update On Electronic Payment Thematic Group
When we introduced this thematic equity group in September 2012, we projected that it was poised to deliver above average returns. These companies have enjoyed many advantages atypical of most other industries, and performance-wise, this group did not disappoint. A large subset of the theme, Data Processing & Outsourced Services, is rated Attractive by our GS Scores, and has been a portfolio holding for 50 months.
Highlighted Attractive Groups
A snapshot of Automotive Parts & Equipment, Large Cap Biotechnology, and Reinsurance.
Health Care Comes Down With A (Minor) Cold
A reversal in momentum, driven by the oil and commodity stocks’ rebound, caused investors to take gains from Health Care positions. We’re still big fans of Health Care and think recent weakness is more of a correction within a sector bull market than the start of a full-fledged bear.
Return Of The Tech? New Group Purchased
Over the past three months the Tech sector has strengthened in our work, as it’s risen back to the #3 position. In line with our disciplines, we increased the Select Industries Portfolio’s Tech exposure via the addition of a new, high-ranking group: Technology Distributors.
Highlighted Attractive Groups
Airlines has spent only three months below “Attractive” since early 2012 and the group’s factor category scores continue to provide solid results. We also like the growth prospects for Drug Retail and Apparel Retail.
Purchased Advertising: Global/Digital Prospects Appealing
Advertising has been in the top rankings of our Group Selection (GS) model for several months.
Automotive Retail: Still In The Driver’s Seat
We revisit this long-held industry group and explain our positive outlook going forward.
GS Score Sector Rankings, and Highlighted Attractive Groups
Health Care, Consumer Discretionary, and Financials remain the top three rated broad sectors.
Oil & Gas Refining & Marketing: New Purchase
Amidst the Energy carnage, the Oil & Gas Refining & Marketing group is the exception, having returned over 7% YTD. Refiners are able to perform well in a variety of oil price scenarios—and tend to thrive in a falling crude oil price environment.
Small/Micro Cap Biotechnology: Still Richly Valued
Despite the group’s big losses since May, the results show Small/Micro Cap Biotechs are still richly valued. As market volatility heats up, this group faces additional downside risk.
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