E Weekly Report

Returns for our weekly best scoring by market cap:  Buy and Hold 1 Year, 0% turnover

• The best sector is industrial goods

 

The best sector is industrial goods (AGCO, BA, IR, AVAV, MIDD).  Consumer goods (FOSL, GNTX, FLO, GM, TAP), financials (PSA, NDAQ, CINF, HBHC, AFL) and services (TRN, DXPE, OUTR, OCR, KSU) also score above average.  In financials, buy large and small cap rather than mid cap and in services tilt buys toward small cap.
 
Healthcare (SIAL, ANGO, UTHR, JNJ, BDX) scores in line; concentrate on large and mid cap instead of small cap.
 
Technology (VRSN, MTD, MEI, OTEX, ACXM), basics (ZEUS, CMC, CF, MON, OXY) and utilities (EQT, LG, CNP, EGN, AES) remain below average.  In technology, large cap is a better play than mid and small cap.
 

The following chart visualizes score by market cap and sector.
 

This next chart shows historical moving average universe scores for 4, 8, and 12 weeks.  It also overlays the universe average score alongside the SPX.
 

The following table updates earnings beats by sector.  On average, large cap healthcare, mid cap consumer goods, and small cap technology have been best at over-delivering earnings over the past four quarters, while basics have struggled.
 

 

Industrial Goods
 

Industrials remain the top scoring sector as managers become increasingly hopeful regarding recovering European demand.   The UK and Italy are showing signs of improving economic activity, with the UK recording its 2nd consecutive month of rising industrial production.  Germany and France appear to be handing the baton.  Among the top scoring in industrials are aerospace/defense (BA) and construction related companies (X, TREX, TEX).  U.S. airline consolidation provides stronger balance sheets and global travel projections suggest Boeing and Airbus will continue to increase production rates to work down record backlogs — bullish for suppliers (AIR, CW) again in 2014.  Construction spending remains uneven, but hotel, office, and manufacturing construction remains positive and should accelerate next year as bank lending gets more aggressive and developers seek to take advantage of low rates before they move higher.