The best scoring mid caps from one year ago (2/13/2013) averaged 143 bps of excess over the S&P 400, with 0% turnover.  The top performers include GMCR up 144%, NFLX up 131%, VRX up 104%, HBI up 78%, and OTEX up 73%.


 

• The best scoring mid cap sector is industrial goods.
• The top scoring mid cap industry is residential construction.

The average mid cap score is 64.66, above the four week moving average score of 62.16.  The average mid cap is trading -14.3% below its 52 week high, 2.93% above its 200 dma, has 7.05 days to cover short, and is expected to grow EPS by 17.8% next year.
 
Industrial goods are the best scoring sector across mid cap, followed by consumer goods, financials, and healthcare.  Those should be over weights.  Technology scores in line and has been improving.  Services, basics, and utilities score below average.
 

Commentary:

The following chart provides historical mid cap score by sector since 2010.

The best scoring mid cap industry is residential construction (NVR, KBH, RYL).  Trucking (HTLD, KNX) offers opportunity on capacity driven pricing power.  The DoE expects diesel prices to fall this year and next year, dropping from $3.92 to $3.83 in 2014 and $3.73 in 2015. Combined with route technology, and more efficient engines, cost per mile should benefit.  Accident & health insurance (CNO, AIZ) benefits from reform driven enrollment, ongoing job growth, and equity portfolio increases. Semi equipment (TER) demand is heading into its peak season, with SEMI book-to-bill historically hitting its best levels in Q2.  Asset manager (OZM, WETF, AB) fee revenue benefits from volatility and migration to equities from lower fee fixed products. Restaurants (WEN, EAT, PZZA, BWLD) are enjoying foot traffic and sales growth.  The Nat'l Restaurant Assoc's Performance Index remained above 100 for a 10th consecutive month in December.  The expectations component grew 0.4% from November.

In mid cap basics, only drillers (PTEN, NBR) score above average -- tilt toward large cap where more options exist.  The BHI Rig Count totaled 1771 rigs on Feb. 7th, up from 1759 a year ago. In consumer goods, buy textiles (COLM, DECK, SKX), business equipment (PAY), and packaging (MINI).  The top financials baskets are accident & health insurance, asset managers, and REITs (KRC, ARE, WRI).  In healthcare, focus on medical instruments (TFX, WST, PKI, DXCM, NUVA), and biotech (CRL, GEVA, PBYI).  In industrials, buy residential construction, and industrial electrical equipment (LFUS). In 2013, housing starts grew 18.3% year-over-year and permits increased 17.5%.  The top services groups are truckers, restaurants, and rental & leasing services (UHAL).  In technology, buy semi equipment, computer peripherals (ZBRA, LXK, EFII), and scientific & technical instruments (BRKR).  Life sciences R&D spend benefits from emerging market spending growth and recovering spending here in the U.S. and in Europe.