TripleScreenMethod.com
Current Monthly Trading Article
(appeared in September '04 issue of CANSLIM.net News)
Industry Groups to Watch During the Last
Quarter
From intra-day to multi-year periods, one can identify bullish and bearish
phases of the market that repeat often enough to be judged statistically
significant. I’ve written here, for example, about both the Presidential and
six-month cycles in the market, while others are described in Larry William’s
“The Right Stock and the Right Time” and Yale and Jeffrey Hirsch’s “Stock
Trader’s Almanac.”
Let’s consider now the historical performance of the 31 Industry Groups through the September-to-December period from 2000 to 2003, i.e., just before the recent business cycle bottom that reached its trough in November of ’01 (National Bureau of Economic Research). Of course, our goal is to find groups and their respective membership stocks that have performed significantly better than the market over this period, just as we begin to enter another chapter.
The table lists by Industry Group the average return by year, the excess return over the S&P 500, the summed excess return over the 2000-to-2003 period, and selected companies (with quality fundamentals) within each group. The Automotive Industry Group, for example, outperformed the S&P in each of the four years by a total of 32.2%, and MPX, HDI, and TM are the quality member stocks within that group. The chart also depicts the total return of the 31 Industry Groups.
As a statistician, I often question the significance of these patterns. It is one thing to see a pattern but quite another to assess its significance and therefore its usefulness. Using a statistical approach known as “Resampling,” I determined that one might expect a total return at or above the 32.2% level 8.2% percent of the time by chance alone (and at or above a 30.9% return 9.6% of the time by chance alone). These top three groups are significant enough to have a root cause and, therefore, significant enough to project a recurrent theme.
|
Industry |
2003 |
Excess |
2002 |
Excess |
2001 |
Excess |
2000 |
Excess |
2000- |
Membership |
|
Automotive |
12.1 |
6.5 |
25.3 |
14.0 |
-10.9 |
10.5 |
11.1 |
1.2 |
32.2 |
MPX, HDI, TM |
|
Health Services |
10.7 |
5.1 |
15.3 |
4.1 |
-7.5 |
13.9 |
18.4 |
8.5 |
31.6 |
PMTI, PPDI, PDX, MNT, MSA, AMMD, AMED,CYTC, COO, CNC, AMHC, CVH, CMN, LAKE |
|
Aerospace |
18.7 |
13.1 |
20.2 |
8.9 |
-10.3 |
11.0 |
7.7 |
-2.2 |
30.9 |
AYL, UIC, DRS, TASR |
|
Leisure |
2.2 |
-3.3 |
21.0 |
9.8 |
-10.7 |
10.7 |
17.8 |
7.9 |
25.0 |
SBUX, PENN, MBG, CCL, ISCA, STN |
|
Tobacco |
4.4 |
-1.2 |
17.9 |
6.6 |
-6.0 |
15.3 |
10.9 |
1.0 |
21.7 |
BTI, RAI |
|
Conglomerates |
13.5 |
8.0 |
19.3 |
8.0 |
-6.5 |
14.8 |
0.3 |
-9.6 |
21.2 |
FO, HSC, MMM UTX, TMO |
|
Diversified Services |
6.1 |
0.5 |
18.6 |
7.3 |
-25.5 |
-4.1 |
26.8 |
16.9 |
20.5 |
EXBD, CME, RNT, AH |
|
Internet |
14.5 |
8.9 |
32.5 |
21.2 |
-39.4 |
-18.0 |
18.2 |
8.3 |
20.4 |
EBAY, SYMC, JUPM, WBSN |
|
Manufacturing |
5.7 |
0.1 |
21.3 |
10.0 |
-18.8 |
2.6 |
16.5 |
6.6 |
19.3 |
IMGC, CRDN, BDK, NDSN, CUNO, MIDD |
|
Materials & Construction |
-0.3 |
-5.9 |
19.7 |
8.4 |
-11.1 |
10.3 |
15.7 |
5.8 |
18.7 |
FRK |
|
Nasdaq |
1.9 |
-3.7 |
22.8 |
11.6 |
-28.3 |
-6.9 |
23.6 |
13.7 |
14.7 |
|
|
Wholesale |
5.4 |
-0.2 |
13.5 |
2.3 |
-17.7 |
3.6 |
18.9 |
9.0 |
14.7 |
SCSC, PDCO, MSM, CEDC |
|
Specialty Retail |
0.6 |
-5.0 |
27.2 |
15.9 |
-18.4 |
3.0 |
10.2 |
0.3 |
14.2 |
MIK, CPRT, DKS |
|
Transportation |
5.1 |
-0.5 |
13.1 |
1.8 |
-9.8 |
11.6 |
10.7 |
0.9 |
13.8 |
FWRD, FDX, EXPD, LSTR, SCST, YELL, GMR,JBHT, KNGT, LFL, NAT NSC, OLG |
|
Chemicals |
11.6 |
6.0 |
16.6 |
5.3 |
-13.1 |
8.3 |
3.2 |
-6.7 |
13.0 |
BG |
|
Russell 2000 |
-1.0 |
-6.6 |
24.4 |
13.1 |
-21.6 |
-0.2 |
14.6 |
4.7 |
11.0 |
|
|
Consumer Non-Durables |
8.4 |
2.8 |
5.7 |
-5.6 |
-8.8 |
12.6 |
10.9 |
1.0 |
10.8 |
RL, DECK, BLL |
|
Banking |
-0.3 |
-5.9 |
16.9 |
5.7 |
-10.6 |
10.8 |
9.6 |
-0.3 |
10.3 |
NDE WSBK CCBI, EWBC, NARA |
|
Financial Services |
-4.2 |
-9.8 |
21.1 |
9.8 |
-20.8 |
0.6 |
19.3 |
9.4 |
10.0 |
ACF, IFIN, FMD |
|
Computer Software |
4.6 |
-1.0 |
19.2 |
7.9 |
-37.2 |
-15.8 |
28.7 |
18.8 |
9.9 |
WIT, NAP TZOO, CTSH, INFY |
|
Insurance |
5.5 |
-0.1 |
16.9 |
5.7 |
-16.0 |
5.4 |
7.4 |
-2.5 |
8.4 |
UCI, BRO UHCO, MFC |
|
Food and Beverage |
6.9 |
1.3 |
7.1 |
-4.2 |
-7.1 |
14.3 |
5.7 |
-4.2 |
7.2 |
HANS |
|
Dow |
6.5 |
0.9 |
10.5 |
-0.8 |
-16.6 |
4.8 |
10.8 |
0.9 |
5.8 |
|
|
Drugs |
7.0 |
1.4 |
11.3 |
0.0 |
-26.5 |
-5.2 |
19.1 |
9.2 |
5.5 |
BIIB, BSTE |
|
Metals & Mining |
-1.3 |
-6.9 |
24.6 |
13.4 |
-19.9 |
1.5 |
6.8 |
-3.1 |
4.9 |
CRS, ARLP, BHB |
|
Real Estate |
-2.8 |
-8.4 |
9.8 |
-1.5 |
-5.0 |
16.4 |
7.5 |
-2.4 |
4.2 |
RWT, DRL, LEND, BMHC |
|
Retail |
-3.1 |
-8.7 |
19.1 |
7.8 |
-17.8 |
3.6 |
10.3 |
0.4 |
3.1 |
ARO, URBN, FAST, CLE, CHS, JOSB, BMHC, JCP |
|
S & P |
5.6 |
0.0 |
11.3 |
0.0 |
-21.4 |
0.0 |
9.0 |
0.0 |
0.0 |
|
|
Consumer Durables |
-2.3 |
-7.9 |
15.5 |
4.2 |
-16.2 |
5.2 |
6.7 |
-3.2 |
-1.7 |
HAR, FOSL |
|
Energy |
16.0 |
10.4 |
7.9 |
-3.4 |
-20.4 |
1.0 |
-0.6 |
-10.4 |
-2.4 |
SII, BJS, HYDL |
|
Electronics |
-10.2 |
-15.7 |
31.8 |
20.5 |
-44.2 |
-22.8 |
24.5 |
14.6 |
-3.5 |
AMXC, ISSC, FLIR, CREE, IIVI |
|
Computer Hardware |
-5.8 |
-11.4 |
29.6 |
18.3 |
-33.3 |
-11.9 |
8.6 |
-1.3 |
-6.2 |
ZBRA |
|
Utilities |
4.2 |
-1.4 |
12.5 |
1.3 |
-18.0 |
3.4 |
-2.4 |
-12.3 |
-8.9 |
SWN |
|
Media |
3.6 |
-2.0 |
16.7 |
5.4 |
-33.1 |
-11.7 |
8.0 |
-1.9 |
-10.2 |
|
|
Telecommunications |
2.8 |
-2.8 |
19.2 |
7.9 |
-32.9 |
-11.5 |
-2.7 |
-12.6 |
-18.9 |
RIMM, GCOM, MBT |