Large Cap Best & Worst Report - June 2, 2015

Since 2010, the top scoring stocks in our large cap report each week have outpaced the SPX by a median 269 bps in the following year.

• Healthcare is the top large cap sector (yet again).
• Healthcare plans remain the top large cap industry.

The average large cap score is 56.29 and that is above the four week average score of 58.32. Overall, the average large cap stock is trading -13.05% below its 52 week high, 1.82% above its 200 dma, has 4.21 days to cover held short, and is expected to grow EPS by 14.48% in the coming year.

Healthcare continues to be the top scoring large cap sector. Technology is improving and utilities also score above average. Consumer goods and services score in line. Industrial goods, financials, and basic materials score below average.

The following chart shows historical large cap scores by sector since 2010.

The top large cap industry is healthcare plans (AET, HUM, ANTM, CI). Industry interest in boosting exposure to Medicare and Medicaid remains high. Major food (MDLZ, ADM) scores highly and that's in keeping with historical pre-summer seasonal strength. The same goes for cigarettes (RAI, LO). Auto parts (MGA, JCI) could see sales upside tied to improving vehicle demand post-QE in Europe. Drug store (RAD, OCR, CVS) same store sales remain supported by aging boomers and an increasingly insured population. The acquisition of OCR reinforces industry potential tied to rising specialty drug demand; particularly among seniors.

The following table breaks out EPS beats data for each industry in our universe by market cap (minimum 3 equities).

Click on picture to enlarge

In basics, only major chemicals (SHW, EMN, DOW) score high. The top consumer groups include major food, auto parts, and cigarettes. In financials, concentrate attention on credit services (SLM, MCO, EFX, DFS), S&Ls (NYCB), and P&C insurers (AIG, ACE, PRE, PGR, ACGL). The best healthcare industries are healthcare plans, biotech (GILD, MDVN, ILMN, SGEN, CELG, BMRN), and drugmakers (ABBV, LLY, VRTX, ABT, VRX). Biotech stocks historically generate significant excess to the SPY in June and July. Only aerospace/defense (TDG, SPR, BA, GD) is above average across industrial goods. Drug stores, wholesale drugs, and diversified entertainment (DIS, TWX, NWS) are the top baskets in services.  In technology, overweight diversified communication systems (LVLT, CCI, AMT), specialized semiconductor (SCTY, NVDA, XLNX, MCHP), and broadline semiconductor (NXPI, ADI, MXIM, INTC). In Utilities, the strongest stocks are EIX, PPL, and HNP.