Weekly Report: Alpha Generating Ideas
Top scoring weekly returns: Buy and Hold 1 Year
- The best sector is industrial goods
The best scoring sector remains industrial goods heading into Q4 earnings season. Managers should remain overweight on potential European recovery.
Consumer goods, services and healthcare also score above the universe average score. In healthcare, managers should tilt toward large cap.
Financials, technology, basics, and utilities score below average. Managers should buy large and small cap financials, rather than mid cap. Stay industry specific in basics, which offer solid seasonality across energy during the first quarter.
Industrial Goods
One of the most intriguing opportunities for industrial goods companies this year is a return to growth in Europe. Nascent signs of strength (similar to the U.S. in 2009) are developing, including rising productivity, falling labor costs, and a deceleration in credit tightening for enterprises, suggesting headwinds may ease and industrials with EU exposure may benefit given easy comparisons. Aerospace remains one of the best scoring industrial baskets thanks to rising production at OEMs. Construction machinery -- think cranes -- could see demand lift this year as construction spending increases. Construction spending rose 5.9% year-over-year in November and has increased 5% in the first 11 months versus a year ago. Compared to last year, nonresidential private spending grew more than 20% for lodging, office, and commercial. Residential housing, which had been dormant for months, is re-exerting as managers increasingly embrace the idea home buyers will adjust to higher rates thanks to job growth. November private residential construction spending was 16.6% higher than last year.
Consumer Goods
Some of the top scoring stocks across consumer goods include auto parts and textiles. Auto sales growth is maturing and will likely decelerate in the U.S. this year; however opportunity for growth remains in Europe where registrations have been showing improvement. Full year 2013 U.S. auto sales will likely total 15.6 million, the best showing since 2007. Commercial vehicle and passenger vehicle registrations in the EU rose 8.9% and 1.2% YoY in November, respectively. Low cotton prices and solid retail apparel turnover support textiles stocks through the Q4 EPS reporting season. "A" index cotton prices per pound fell to 84.65 cents in November, down from 89.35 cents in October and 93.08 cents in June.
Services
Intermodal continues to support rail carloads, offsetting 2013 weakness in coal and grain. Total intermodal volume improved 4.6% in 2013 from 2012, helping total carloads increase 1.8%. Petroleum saw carloads increase the most last year thanks to Bakken and Eagle Ford. Post grain harvest export demand has been rebounding, suggesting rising exports may offer grain carload pricing power for rails. Coal activity remains weak, however year-over-year declines have decelerated and comparisons are much easier than two years ago.
Apparel stores also score high in services and offer strength through the Q4 EPS reporting season. Retail sales for clothing stores in the 3-month period ending November were 3.5% higher than the comparable period in 2012.
Healthcare
Generics will re-exert in 2014 as the 'breather' in the patent cliff ends and high profile brands lose protection this year and next year. Specialty drugs continue to drive profit growth across biotech thanks to pricing power and label expansion. Big pharma will continue to embrace partnerships and/or collaboration agreements with emerging biotech and industry pipelines will expand as more readily available financing helps push pre-clinical into trials. The FDA approved 27 drugs in 2013, one third of which were orphan. 25 new drug applications are pending for 2014 and the total number of drug studies registered on the NIH's Clinical Trials climbed to 158.4k in 2013 from 138.9k in 2012.
Economic Data to Watch this Week:
January 6th | January 7th | January 8th |
ISM non-manuf. 54.5 Factory Orders 1.8 |
ICSC Chain Sales |
ADP Consumer Credit |
Top Scoring Stocks:
LARGE CAP | 12/31/2013 | 4 Week MA | MID CAP | 1/2/2014 | 4 Week MA | ||
Symbol | Sector | SCORE | SCORE | Symbol | Sector | SCORE | SCORE |
BEST | BEST | ||||||
AMP | FINANCIALS | 110 | 108.75 | HAS | CONSUMER GOODS | 110 | 100 |
AZO | SERVICES | 110 | 108.75 | OCR | SERVICES | 110 | 110 |
CELG | HEALTHCARE | 110 | 101.25 | DDS | SERVICES | 105 | 103.75 |
DIS | SERVICES | 110 | 107.5 | IRF | TECHNOLOGY | 105 | 103.75 |
GLW | TECHNOLOGY | 110 | 98.75 | KSU | SERVICES | 105 | 96.25 |
MCHP | TECHNOLOGY | 110 | 102.5 | PVH | CONSUMER GOODS | 105 | 91.25 |
MYL | HEALTHCARE | 110 | 100 | TSCO | SERVICES | 105 | 96.25 |
SIAL | HEALTHCARE | 110 | 110 | VRSN | TECHNOLOGY | 105 | 107.5 |
AGN | HEALTHCARE | 105 | 95 | ACT | HEALTHCARE | 100 | 88.75 |
APH | TECHNOLOGY | 105 | 103.75 | ALXN | HEALTHCARE | 100 | 98.75 |
BDX | HEALTHCARE | 105 | 97.5 | ARRS | TECHNOLOGY | 100 | 97.5 |
CHK | BASIC MATERIALS | 105 | 100 | BWA | CONSUMER GOODS | 100 | 98.75 |
CSX | SERVICES | 105 | 103.75 | CHD | CONSUMER GOODS | 100 | 98.75 |
ITT | INDUSTRIAL GOODS | 105 | 96.25 | CHH | SERVICES | 100 | 98.75 |
JPM | FINANCIALS | 105 | 93.75 | CLB | BASIC MATERIALS | 100 | 88.75 |
OI | CONSUMER GOODS | 105 | 105 | CMC | BASIC MATERIALS | 100 | 97.5 |
TAP | CONSUMER GOODS | 105 | 103.75 | CNO | FINANCIALS | 100 | 92.5 |
AON | FINANCIALS | 100 | 98.75 | COLM | CONSUMER GOODS | 100 | 92.5 |
BA | INDUSTRIAL GOODS | 100 | 102.5 | CRS | BASIC MATERIALS | 100 | 97.5 |
BCR | HEALTHCARE | 100 | 88.75 | CSL | CONSUMER GOODS | 100 | 97.5 |
CF | BASIC MATERIALS | 100 | 98.75 | CVD | HEALTHCARE | 100 | 86.25 |
CLR | BASIC MATERIALS | 100 | 96.25 | CW | INDUSTRIAL GOODS | 100 | 100 |
CLX | CONSUMER GOODS | 100 | 97.5 | FDML | CONSUMER GOODS | 100 | 80 |
ESRX | SERVICES | 100 | 86.25 | HP | BASIC MATERIALS | 100 | 100 |
KORS | SERVICES | 100 | 82.5 | HRL | CONSUMER GOODS | 100 | 92.5 |
LEA | CONSUMER GOODS | 100 | 92.5 | ILMN | HEALTHCARE | 100 | 100 |
LO | CONSUMER GOODS | 100 | 97.5 | JKHY | TECHNOLOGY | 100 | 87.5 |
MCO | FINANCIALS | 100 | 98.75 | LEN | INDUSTRIAL GOODS | 100 | 93.75 |
MJN | CONSUMER GOODS | 100 | 95 | MTW | INDUSTRIAL GOODS | 100 | 95 |
MON | BASIC MATERIALS | 100 | 97.5 | NTES | TECHNOLOGY | 100 | 83.75 |
NUE | BASIC MATERIALS | 100 | 98.75 | NVR | INDUSTRIAL GOODS | 100 | 87.5 |
NVDA | TECHNOLOGY | 100 | 78.75 | OTEX | TECHNOLOGY | 100 | 100 |
NWL | CONSUMER GOODS | 100 | 100 | PII | CONSUMER GOODS | 100 | 96.25 |
PRGO | HEALTHCARE | 100 | 88.75 | SF | FINANCIALS | 100 | 100 |
RRC | BASIC MATERIALS | 100 | 86.25 | SKX | CONSUMER GOODS | 100 | 81.25 |
RY | FINANCIALS | 100 | 85 | TEX | INDUSTRIAL GOODS | 100 | 100 |
TMO | CONGLOMERATES | 100 | 91.25 | TIVO | SERVICES | 100 | 71.25 |
UPL | BASIC MATERIALS | 100 | 82.5 | TPX | CONSUMER GOODS | 100 | 91.25 |
V | SERVICES | 100 | 91.25 | TTC | INDUSTRIAL GOODS | 100 | 98.75 |
WM | INDUSTRIAL GOODS | 100 | 91.25 | WWW | CONSUMER GOODS | 100 | 97.5 |
WY | INDUSTRIAL GOODS | 100 | 93.75 | ||||
SMALL CAP | 1/2/2014 | 4 Week MA | ADRS | 12/30/2013 | 4 Week MA | ||
Symbol | Sector | SCORE | SCORE | Symbol | COUNTRY | SCORE | SCORE |
BEST | BEST | ||||||
CENX | BASIC MATERIALS | 105 | 87.5 | INFY | India | 100 | 92.50 |
HGR | HEALTHCARE | 105 | 86.25 | NTES | China | 100 | 75.00 |
MBWM | FINANCIALS | 105 | 85 | RY | Canada | 100 | 85.00 |
AGYS | SERVICES | 100 | 87.5 | ARMH | United Kingdom | 95 | 93.75 |
ANAC | HEALTHCARE | 100 | 100 | BRGYY | United Kingdom | 95 | 82.50 |
ANN | SERVICES | 100 | 68.75 | GA | China | 95 | 82.50 |
DPZ | SERVICES | 100 | 96.25 | MPEL | Hong Kong | 95 | 82.50 |
FFIN | FINANCIALS | 100 | 97.5 | PSDV | United States | 95 | 50.00 |
GBX | SERVICES | 100 | 88.75 | SIG | Bermuda | 95 | 92.50 |
GCO | SERVICES | 100 | 78.75 | ASR | México | 90 | 87.50 |
SABA | TECHNOLOGY | 100 | 88.75 | BIDU | China | 90 | 66.25 |
SNHY | INDUSTRIAL GOODS | 100 | 90 | GENT | Italy | 90 | 70.00 |
UHAL | SERVICES | 100 | 97.5 | GSOL | Bermuda | 90 | 58.75 |
WIRE | BASIC MATERIALS | 100 | 97.5 | JOBS | China | 90 | 90.00 |
WTFC | FINANCIALS | 100 | 91.25 | NJ | Japan | 90 | 77.50 |
ACIW | TECHNOLOGY | 95 | 92.5 | NVO | Denmark | 90 | 82.50 |
AFFX | TECHNOLOGY | 95 | 86.25 | RIO | United Kingdom | 90 | 88.75 |
BCOR | TECHNOLOGY | 95 | 95 | SAP | Germany | 90 | 76.25 |
BDC | INDUSTRIAL GOODS | 95 | 98.75 | SI | Germany | 90 | 77.50 |
BLDR | SERVICES | 95 | 71.25 | ABB | Switzerland | 85 | 71.25 |
BONT | SERVICES | 95 | 88.75 | GMK | México | 85 | 73.75 |
CBRL | SERVICES | 95 | 90 | HIMX | Taiwan | 85 | 62.50 |
CCC | INDUSTRIAL GOODS | 95 | 95 | HMC | Japan | 85 | 80.00 |
CDI | SERVICES | 95 | 87.5 | JST | China | 85 | 87.50 |
CFNL | FINANCIALS | 95 | 83.75 | NICE | Israel | 85 | 75.00 |
CHE | HEALTHCARE | 95 | 82.5 | NTZ | Italy | 85 | 51.25 |
CRZO | BASIC MATERIALS | 95 | 93.75 | SID | Brazil | 85 | 82.50 |
CWT | UTILITIES | 95 | 81.25 | SORL | China | 85 | 53.75 |
DXYN | CONSUMER GOODS | 95 | 75 | SPRD | China | 85 | 72.50 |
FINL | SERVICES | 95 | 87.5 | VE | France | 85 | 41.25 |
HUBG | SERVICES | 95 | 81.25 | VLCCF | Bermuda | 85 | 48.75 |
IMAX | CONSUMER GOODS | 95 | 75 | WF | Korea | 85 | 62.50 |
LCAV | HEALTHCARE | 95 | 63.75 | AMX | México | 80 | 73.75 |
LFUS | INDUSTRIAL GOODS | 95 | 88.75 | ANW | Greece | 80 | 58.75 |
MATW | INDUSTRIAL GOODS | 95 | 92.5 | BP | United Kingdom | 80 | 78.75 |
OPEN | TECHNOLOGY | 95 | 95 | CAAS | China | 80 | 55.00 |
PLXT | TECHNOLOGY | 95 | 82.5 | CTRP | China | 80 | 67.50 |
PRCP | TECHNOLOGY | 95 | 67.5 | ELN | Ireland | 80 | 55.00 |
RRGB | SERVICES | 95 | 88.75 | HKTV | Hong Kong | 80 | 60.00 |
SILC | TECHNOLOGY | 95 | 92.5 | JRJC | China | 80 | 56.25 |
SSNC | TECHNOLOGY | 95 | 92.5 | SKM | Korea | 80 | 71.25 |
TRAK | TECHNOLOGY | 95 | 90 | TRIB | Ireland | 80 | 81.25 |
ZEUS | BASIC MATERIALS | 95 | 85 | VIP | Russia | 80 | 78.75 |
WIT | India | 80 | 82.50 |
None.