E Large Cap Best & Worst Report - January 19, 2016

  • The best large cap sector is consumer goods.
  • The top large cap industry is REITs.

The average score across large cap is 49.97 and that's below the four week average score of 53.83. Since the average score has fallen below 50, we are now entering territory where scores tend to coincide with actionable buy points.

The average large cap stock is trading -28% below its 52 week high, -12.32% below its 200 dma, has 4.51 days to cover held short, and is expected to grow EPS by 9.18% in the coming year. Consumer goods, healthcare, technology, and industrial goods score above average. Services score in line with the average universe score. Utilities, financials, and basics score below average.

Historically, risk/reward begins shifting favorable when average large cap scores get below 50. We are currently at the lowest reading since the August low in score, which coincided with a short term market low (note: the SPY double bottomed in the mid 180's). You'll notice in the following chart that large cap scores can get into the low to mid 40s. That hasn't happened since 2012, but it is a possibility.

The ranking is defensive with REITs (DLR, FRT, PSA, O, HCN), cigarettes (RAI, PM), and medical appliances (ISRG, ZBH, VAR, MDT) all among the top scoring industries. Communication equipment (HRS, QCOM) and aerospace/defense (RTN, LMT, COL, BA) also score high.

Across basic materials, only major chemicals (APD, ASH) and oil & gas pipelines (SE) score above average. Cigarettes, processed & packaged goods (CPB, MKC), and beverages (TAP, DPS, STZ) are best in consumer goods. Only REITs score above average in financials. Every healthcare group has a score that is at or above the universe average. Medical appliances, healthcare plans (CI, ANTM, AET), and medical instruments (BDX, BCR, BSX) score highest. The top industrial industries are aerospace/defense and industrial equipment (ROP). Wholesale drugs (CAH), discount stores (TGT, COST), and restaurants (MCD, DRI) should be your focus in services. Communication equipment, scientific & technical instruments (MTD, WAT), and specialized semi (MCHP, XLNX) are top scoring in technology. Diversified utilities (SCG, ED, WEC) can also be bought.

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Disclosure: None.

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