E Weekly Investment Report

 

  The best sector is industrial goods.

 

Industrial goods remain the top scoring sector across our 1500 company universe.  Industrials goods have held the top spot in our sector ranking since October.
 
Healthcare, services, and consumer goods also score above average.  Financials and technology score in line.  In healthcare focus on large and mid cap.  Buy large and small cap services rather than mid cap services.  Focus on mid and small cap consumer stocks instead of large cap consumer stocks.
 
Basics and utilities score below average.
 

Industrial Goods
 

Over the 3 month period ending November, U.K. industrial production climbed 2.8% year-over-year — the best rate of growth since May 2011.  Production in both France and Spain grew in November.  Production improved 1.3% in November from October in France and grew a seasonally adjusted, annualized 2.6% in Spain.  In Germany, where production had been sliding, production returned to growth, finishing 3.5% above last year in November.  Despite the rate of change dipping month-over-month in December, the UK’s services sector grew in every month during 2013.  On January 7th, the IMF’s Christine Lagarde indicated the agency will likely boost global GDP forecasts for 2013.  Currently, expectations call for 2.9% year-over-year growth.  Potential for an improving Europe remains under-modeled in industrials.   In addition to the ongoing strength in aerospace/defense (BA, CW, TDG), machinery (MIDD, ITT) and equipment (LFUS, BDC, SNHY) offer upside.  Residential housing (LEN, NVR) is also re-exerting after consolidating late last year.  Watch for expansion in commercial construction activity to drive results for related machinery, including cranes (TEX, MTW).
 

Healthcare
 

Despite fears regarding the implementation of the medical device tax, managers are turning back to appliances, devices, and instruments — they’re among the best scoring early in 2013 (STJ, STJ, BDX).  Increase your exposure to generic drug makers (MYL, ACT) as the breather in the patent cliff last year ends and expiration re-exerts.  High profile drugs, including Lilly’s blockbuster Cymbalta and Teva’s blockbuster Copaxone, provide an opportunity for upside.