E Weekly Report: Best Performing, Stocks, Sectors And Small Caps

Methodology

Our weekly best and worst reports show you stocks with the best potential returns over the coming 6 to 12 months.  The score is calculated by fusing together the key drivers of price movement including, earnings beats, earnings growth, at-the-market insider buys, institutional activity, short ratio analysis, price to earnings analysis and calendar quarter seasonality.  Those stocks appearing in our best list should be bought while those appearing in our worst list should be sold.

Top scoring weekly returns:  Buy and Hold 1 Year

• The best scoring sector remains industrial goods

The best scoring sector across our entire universe remains industrial goods.  The sector has been at the top of our ranking since October.  Healthcare also scores above the average universe score.

 

Technology, consumer, services and financials all score in line with the universe (stay industry specific).  Stay focused on large and mid cap technology rather than small cap (so far).  In consumer, buy mid cap.  Tilt small cap in financials.

 

We are seeing a bunching of sector scores near the average — that typically happen at turning points.  We’ll be watching closely to see what baskets exert or roll.  Only basics and utilities score below average.

The following chart visualizes score by sector and market cap.

 

The next chart shows how the average score over the past four weeks measures up against the average score over the past eight and 12 weeks.  You’ll notice the four week measure remains below the other two measures, suggesting risk remains.  We’ll continue to watch for a positive cross-over back above the eight and 12 week to confirm an end to the current sell-off.
 

 

The following table breaks out the 3-month seasonality for the major market ETFs over the past 10 years.  The period has historically rewarded investors with the SPY gaining in 8 of the past 10, returning a median 4.94%.  The best return has come from mid cap, with the MDY gaining a median 5.74%.  Large cap Nasdaq stocks have been most volatile, with the QQQ posting a standard deviation of 8.12%.  The MSCI EAFE (EFA) is least correlated to the SPY (as one might expect) and offers the lowest standard deviation at 3.3%.

 

This next table breaks out the best seasonal sectors and industries for the period. Natural gas has finished the period higher in 9 of the past 10 years. The remaining have all gained in 8 of the past 10.  The best median return has come from energy, natural gas, real estate, and industrials.  Energy is least correlated to the SPY and technology has the highest standard deviation.  
 

Industrial Goods

 

Aerospace/defense (BA, BEAV, NOC, TDG, CW, ESL) and construction related (MTW, TEX, NVR, FLR, LEN) dominate the best scoring list across industrial goods.  Boeing has beat analyst estimates in each of the past four quarters and consensus has climbed from $8.28 per share to $8.36 per share in 2015 over the past 90 days as analyst’s model production growth.  BA’s net orders totaled 1355 plans in 2013, boosting its backlog to 5080 planes.  BA expects 737 productions to climb to 42 planes per month in 2014 and 47 per month in 2017.  B/E Aerospace has beat in 3 of the past 4 and estimates have climbed from $5.09 to $5.11 in the past 90 days.  Transdigm has beat in 4 of the past 4 and analysts have increased 2015 estimates back to $8.54 from $8.36 60 days ago.  Across those top scoring construction related names that have reported Q4 results, Manitowac has beat in 3 of the past 4 and estimates have increased from $1.85 to $1.89 in the past 90 days.  NVR’s estimate has increased from $87.45 to $93.15 in the past 90 days and LEN has beat in each of the past 4 quarters and seen its 2015 estimate increase from $3.21 to $3.28 in the past 90 days.  As a reminder, earnings beats and forward earnings growth are key components in our scoring model.