E Weekly Investment Report: Top Scoring Stocks

Top scoring weekly returns:  Buy and Hold 1 Year

 

Financials have displaced industrial goods, continuing their climb up our ranking. Industrials, utilities, and consumer goods all score above average. Despite being the top scoring sector in large cap last week, healthcare scores in line across the entire universe. Services also score in line. Basic materials and technology score below average.

 

The following chart visualizes score by sector and cap.

The following chart shows the four, eight, and 12 week moving average of our universe score. This chart has been signaling worsening risk reward (four week below the eight and 12 week). However, a move in the four week back above the eight and 12 could signal improving risk/reward soon. If so, you’ll want to increase exposure to the top scoring sectors.  NOTE: Scores will be shifting soon to reflect Q2 seasonality (that may affect leadership).

FINANCIALS

Financials have been improving in our work. Historically, financials offer opportunity into summer.  REITs (NNN, PSA, FRT, RWT), banks (FHN, CFNL, WTFC), and asset managers (AB, AMP, OZM) are well represented in our best scoring ranking this week. REITs offer robust seasonality. NAR estimates office rents will climb 2.3% in 2014 and 3.2% in 2015. Industrial rents will climb 2.4% in 2014, and 2.6% in 2015. Delinquency rates fell to 3.58% in Q4, down from 4.73% a year ago, and continue to support easing credit standards and loan portfolio growth at banks.

INDUSTRIAL GOODS

February’s gain in manufacturing production was the biggest since last August, bringing the month’s total industrial production 2.8% higher than a year ago.  Capacity utilization rose 1.3% in February to 78.8%. Durables production grew 4.6% year-over-year. Defense & space grew 2.6% and aerospace rose 2.2% (TDG, BEAV, GD, HON). Equipment parts were up 4.1%, machinery expanded 3%, and fabricated metals grew 2.6% (MIDD, ITT, BDC, LFUS, SNHY, FLS). Construction related stocks are also strong heading into warm weather (MTW, MDU, TEX, NVR, LEN). February building permits, which are far less volatile than housing starts, were  6.9% higher year-over-year in February.