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.

The best scoring mid caps from one year ago (2/272013) averaged 327 bps of excess over the S&P 400, with 0% turnover.  The top performers include GMCR up 152%, NFLX up 145%, VRX up 117%, HBI up 93%, and UTHR up 70%.



 

• Industrial goods are top scoring across mid cap this week.
• The best mid cap industry is residential construction 

The average mid cap score is 69.14, above the four week moving average score of 66.21. The average mid cap is trading -11% below its 52 week moving average, 7.1% above its 200 dma, has 6.3 days short, and is expected to post EPS growth of 17.6% next year.
 
The best scoring sector is industrial goods. Healthcare, consumer, financials, and technology also score above average. Services, basics, and utilities score below average.
 

Commentary:

The top scoring mid cap industry remains residential construction (NVR, RYL, KBH). New home sales were 2.2% higher than a year ago in January. The median sales price climbed to $260.1k from $251.5k last year. While builder's book-to-bill is arguably not cheap, ratios are significantly lower than a year ago. The measure at RYL has fallen from above 4 in Q2 2013 to 2.3x, while the measure at KBH has dropped from above 4 to 3.16. It wouldn't be surprising to see this measure peak in the second quarter again. Semi equipment (TER, SPIL, ENTG) is high scoring, which is in line with historical seasonal build in book-to-bill (see chart below).  Truckers (HTLD, ODFL, KNX) offer upside tied to capacity driven pricing power, more efficient fleets, robust intermodal logistics demand, and improving GDP.  Education (DV, LOPE) companies are improving, and under-owned thanks to recession era marketing/investigation risks. Broadline semi (CAVM) rounds out our best scoring industries this week.

In mid cap basic materials, buy oil & gas equipment & services (PDS, EXH, RES), and drillers (PTEN, NBR). In consumer goods, focus on textiles (COLM, SKX, DECK), business equipment (DBD, PAY), and auto parts (TEN, FDML). The best financials baskets are accident & health insurance (CNO, AIZ), asset managers (AB, WETF), and REITs (BDN, KRC, ARE, WRI). In healthcare, buy biotech (CRL, PBYI, GEVA, TECH, THRX, QCOR), and medical instruments (TFX, WST, DXCM, PKI, NUVA). All the mid cap industrial groups score above average. Concentrate on residential construction, industrial electrical equipment (LFUS, BDC), and aerospace/defense (ESL, CW, TDY, HXL). In services, buy truckers, education, and restaurants (WEN, EAT, BWLD, PZZA).  The best industries in technology include semi equipment, semi broadline, and computer peripherals (ZBRA, LXK, EFII).