Archive for the ‘Data’ Category

Intermediate Trend Status of All Stocks, ETFs and Mutual Funds (Feb.’17)

Wednesday, March 1st, 2017

Warren Buffet wisely said,

“Be fearful when others are greedy, and be greedy when others are fearful.”

Clearly, you should only be greedy for fundamentally “good” assets, which requires fundamental analysis as the first level of decision-making.

However, determining “when others are greedy” and “when others are fearful” is a matter of technical analysis, which is a good companion to fundamental asset selection and allocation.

Investors as a whole are most greedy at the top of an up trend, and most fearful at the bottom of a down trend.

To follow Buffet’s advice, you must choose between predicting the tops and bottoms of cycles (market timing), or measuring that a top or bottom has just occurred (trend following).

Trend following is the rational choice in our view.

  • Market Timing is based on unspecified or variable information and opinion inputs – it cannot be defined, automated and back-tested.
  • Trend Following is based only on price and volume behavior – it can be defined, automated and back-tested.
  • Market Timing is opinion; subjectively derived about what someone thinks the market ought to do next.
  • Trend Following is factual; objectively derived by observing what the market price and volume have done.

Diagram Mkt Timing versus Trend Following

The “QVM 4-Factor Trend Indicator” is an intermediate trend following method. It is meant to be a technical companion to fundamental asset selection and allocation.

A video explanation of the indicator methodology, including back-testing results with the S&P 500 and precursors from 1904  follows in this video.

It is reasonable to be in or overweight those securities in confirmed up trends; and to be out of or underweight those in confirmed down trends.

If you are considering certain securities for entry, it is reasonable to enter only in a confirmed up trend.

Why enter during a down trend, since you don’t know where the bottom is.  If those securities you intend to own are currently in a down trend, it is reasonable to wait for that down trend to change to a confirmed up trend before committing capital.

The principle value of trend following in practice is not outperforming in up markets, but rather outperforming in down markets (“winning by not losing”) — having a low capture ratio in down markets and a reasonable capture ratio in up markets.

Each month, we measure the intermediate trend status of thousands of listed stocks and ETFs, and over 1400 retail level mutual funds.

For February 2017, we measured the trend status for 8,020 securities.

  • 74% of both the S&P 100 and S&P 1500 stocks were in demonstrated up trends
  • 61% of the 6,578 listed securities were in demonstrated up trends.
  • 78% of the 1,442 mutual funds were in demonstrated up trends.

While this is a monthly subscription data service, the February data package is available to anyone without charge.  Download the full 2017-02-26 trend data spreadsheet here.

REPORT FORMAT AND CONTENT

This article will show you the current trend status of key securities, but first, here is the structure of  what is in the data package.

Full Spreadsheet ColumnsView Annotated

Each tab in the spreadsheet has:

  • the overall trend determination, and the status of the 4 components of the measurement
  • a strength measure for the trend
  • the position of the price versus its trailing high and its trailing range
  • an Overbought and Oversold indicator
  • the price change over the past 3 months and 12 months
  • the average Dollars traded per minute for the security (except for mutual funds which have no volume data)
  • and links per security to multiple third-party information sources (Morningstar, Seeking Alpha, Yahoo, StockCharts, & BarChart)

This is what the trend data looks like:
info1

This is what the other data looks like:info2This is what the third-party information links look like:

info3

If you would like to inspect your portfolio holdings in terms of their intermediate-term trend condition, download the February data package.  The tab for the 1,442 mutual funds most likely has any fund you may own.  The tab for all listed securities with sufficient data (about 28 months of existence) will most likely have the vast majority of the listed securities you own.

CAUTION: Bond funds are included in the study, but the trend determinations may be less clear for them, as bonds do not tend to change direction as often or as dramatically as equities — and this methodology has not yet been back-tested for bonds.  Bond funds are included for completeness, but may not all be appropriate for such analysis.  Long-term and low quality bond funds are probably more appropriate for this method of analysis than short-term and high quality bonds funds.

FEBRUARY TREND MEASUREMENT RESULTS

Here are some of the data points that may be of general interest about the state of the markets:

TARGET DATE FUNDS

All of the members of this group from Vanguard (the largest purveyor of target date funds) for retirement years 2015 – 2055 are in demonstrated up trends.

tgt date

Vanguard target date funds are composed of 5 funds in different allocations along a glide path — one fund each for:

  • US stocks,
  • International stocks,
  • Aggregate US bonds,
  • Short-term US Treasury inflation protected bonds,
  • Aggregate Dollar hedged international investment grade bonds

US ETFs BY STYLES, SECTORS, FACTORS & DIVIDENDS

These and most US asset categories are in up trends.  Some are in or near overbought condition as the “Buying Pressure Level” column shows.

styles and sectors

NON-US COUNTRY ETFs

More are in up trends than down trends. This list is of the country funds in up trends. Interesting to see that Argentina is in the second strongest trend, as measured by Buying Pressure Level.

countries up

This is the list of country funds in down trends.  Mexico is in that group, which may be partially a Trump effect.

Countries down

The other country funds are rated 50 either because they have weak trends, or because they are in transition from one direction to the other.

S&P 100 STOCKS IN UP TRENDS

74% of S&P 100 stocks are in up trends.  Here are the 25 of those in the strongest up trends.  They are mostly all in or near overbought condition.

SP100up

S&P 100 STOCKS IN DOWN TRENDS

SP100 down

LIQUID ETFs IN DOWN TRENDS

Most liquid ETFs (defined here as trading at least $15,000 per minute) are in up trends or rated 50 for a weak or transitional trend, but here is the complete list of those non-bond, non-levered, liquid ETFs that are in down trends.

LquidETFS down

COMMON PORTFOLIO ASSET CATEGORIES

The ETFs in this list represent commonly held asset categories in portfolios:

  • total US stocks
  • large-cap developed markets ex US stocks
  • large-cap emerging market stocks
  • US REITs
  • intermediate-term US Treasuries
  • short-term US Treasury inflation protected securities
  • US aggregate bonds
  • Dollar hedged investment grade international bonds
  • Dollar denominated sovereign emerging market bonds
  • gold bullion.

The David Swensen Portfolio components were referenced in his 2005 book, “Unconventional Success –  a Fundamental Approach to Personal Investment”.  The allocation he used (as updated in 2015 to 5% more emerging markets and 5% less REITs), was 30% US stocks 15% developed markets ex US stocks, 10% emerging markets stocks, 15% US REITs, 15% intermediate-term US Treasuries, and 15% US Treasury inflation protected securities.

He termed it a “reference portfolio” because it is merely a starting point for personalization based on goals, needs, circumstances, and the ability to stick with the portfolio over time.

Swensen is the long-time CIO of the Yale endowment.

2 simple portfolios

We hope you found this helpful and would be pleased to discuss with you how this methodology could be overlayed on your portfolio.  The monthly data subscription is $299 per year.

 

5-Yr Projection of Mean Reversion for S&P 500 Price, GAAP Earnings and Dividends

Monday, July 28th, 2014

One approach to seeking fair value, or simply what is most likely, over the intermediate-term to long-term is the assumption of mean reversion.  That approach basically assumes that long-term means act a bit like gravity or a magnetic attraction that pulls on prices, earnings or dividends to return to the mean growth level.

It may take a lot of patience for that approach, and if there is a permanent structural change in markets, the former mean may not continue to serve as gravitational or magnetic attraction.   On the other hand structural changes are few and far between, making mean reversion a pretty good bet more often that not.

So, lets discover the long-term means for S&P 500 prices, GAAP earnings and dividends; and then apply those means to make reasonable 5-year projections of those dimensions into the future.

Let’s use the S&P monthly data available from Professor Shiller at Yale (you can download the data for yourself to do various studies on your own).  That data begins in the 1800’s using precursors to the S&P 500, such as the Dow Industrials and other data, but we will confine our study to actual S&P 500 data from its inception in 1957 (more than 57 years of data).

LONG-TERM PRICE

The long-term compound growth rate of the price of the S&P 500 is 6.88%.  Continuing that growth curve out 5 years comes up with a future  price projection in the vicinity of 2700.  That is around 36% to 37% above the current level.

Projection1

LONG-TERM GAAP EARNINGS

The long-term compound growth rate of the GAAP earnings for the S&P 500 is 5.90%.  Continuing that growth out 5 years comes up with a future earnings level projection in the vicinity of $115 per index share. That is around 14% above the most recent 2-month trailing earnings levels.

Projection2

LONG-TERM DIVIDENDS

The long-term compound growth rate of dividends for the S&P 500 is 5.37%.  Continuing that growth out 5 years comes up with a future earnings level projection in the vicinity of $45 per index share.  That is around 20% above the most recent 12-month  trailing dividend level.

Projection3

PROJECTION IN THE INTERNET ERA

Now let’s look at the growth trends since the effective beginning of the internet era in 1995, and also use the long-term growth factors from that beginning to see where that ends up.

In 1995, HTML had been around for a few years, and eventually it included ways to add images, not just text. That image capability was added and expanded to browser capability when Mark Andreesen released the Netscape browser in November 1994.  The internet rapidly transformed from a Geeky academic and military technology, to a personal and commercial technology.  It has been disruptive and transformative in business and for stocks ever since.

Keep in mind that if January of 1995 was particularly high or low relative to fair value, the projection would be comparably high or low.  For reference and to make your own judgment about that, here are the multiples at as of December 30, 1994:

  • GAAP earnings yield 5.95% (P/E ratio 18.81)
  • Dividend yield 2.90%
  • Moody’s long-term Baa corporate bonds 9.1%
  • 30-yr Treasuries 7.89%
  • 10-yr Treasuries 7.81%
  • 5-year Treasuries 7.81%
  • 2-yr Treasures 7.69%
  • 3-mo Treasuries 5.6%

The yield curve was essentially flat, while today it is steep. and the Fed was not such an intrusive player.

INTERNET ERA S&P 500 PRICE

These charts have two 5-year projections.  The black dotted plot is a simple exponential trendline on the data from the beginning of 1995 projected out 5 years.  The red solid line is a projection from the beginning of 1995 at the long-term growth rate of the price of the S&P 500.

The exponential trend line is heavily influenced by the extremes of the dot-com bubble, while the long-term growth rate projection is impacted by the degree of “normalcy” of the starting point multiple.

The exponential projection suggests there is little if any price growth in the 5-year future of the S&P 500.  The long-term growth rate applied to the internet era suggests a price level 5 years out in the vicinity of 2900, or about 31% to 32% cumulative price change over the next 5 years.

At a minimum, the explosive growth of the past few years driven by both earnings recovery from the deep 2008 crisis, and by P/E multiple expansion.  Those forces are behind us, not in front of us.

Projection4

There are many optimists among the analyst community, and there are long-term optimists who expect a correction, but there is a much more limited number of outright long-term pessimists.

Two prominent pessimists are Bill Gross of PIMCO and Jeremy Grantham of GMO.

  • PIMCO, as you may know, is predicting stock price appreciation in the 3% to 5% range over the next several years.
  • GMO is another important voice expressing concerns. Their quarterly asset class 7-year forecast is for negative 1.7% rate of return for US large-cap stocks (essentially the S&P 500), negative 5.2% return for small-cap stocks (essentially the Russell 2000), and positive 2.8% for high quality stocks. They see positive 3.6% returns for emerging market stocks,

As to High Quality Stocks, we suspect for the most part GMO was thinking about large-cap stocks that have not participated fully in this momentum market, and which are particularly strong otherwise – such as with consistent but modest revenue and dividend growth, low leverage and strong Balance Sheets, and wide business moats.  See our post of high quality stocks.)

INTERNET ERA GAAP EARNINGS

The exponential trendline from the beginning of 1995 suggests earnings are already too high by about $10 per index share ($100 versus a 5-year projection of about $90).  Let’s hope that is not a good forecast, because the absolute level of earning and the associated negative growth rate would probably crush the stock market.

We do have historically high profit margins, historically low corporate borrowing costs, stagnant wages, above historical earnings growth rates, above average P/E multiples, and stock market capitalization that is at an historically high ratio to US GDP.  Those are key fundamental risk factors that should be evaluated.

The long-tern earnings growth rate applied to the earnings at the beginning of 1995 projected out 5 years, suggests earnings of about $122 per index share, or about 21% above current levels.

Standard & Poor‘s forecasts 2014 GAAP earnings of $119.87 (basically the 5-yr projection level at the long-term growth rate); and $136.39 for 2015.  The 3-year period leading up to the end of 2015 would have a compound earnings growth rate of 16.39% (about 2.5 times the long-term earnings growth rate).  They may be right, but if they are way wrong, there will be major market problems.

Projection5

INTERNET ERA DIVIDENDS

The exponential 5-year projection for S&P 500 dividends goes to about $40 per index share (about a cumulative 7% growth).  The long-term dividend growth rate applied from the beginning of 1995 suggests a 5-year projected cumulative growth of about 22% to about $46 per index share.

Projection6

On balance, we have a greater faith in the growth of dividends than in the growth of either earnings or index price.  We also share GMO’s prediction that high quality stocks will do better over the next few years than large-caps in general.  Additionally, our client basis is at or near the end of the accumulation stage of their financial lives, where assets cannot be replaced easily or at all from new wages or business profits.  That means asset preservation is key, further pushing us in the direction of dividend and high quality bias within the stocks allocation, along with some amount of allocation to partially market neutral assets, such as long/short funds or positions.

 

9 Dividend Stocks Passing a Difficult Filter

Wednesday, July 9th, 2014

You may find something of interest for yourself in this group of filtered dividend stocks.

We quantitatively filtered through David Fish’s Dividend Champions, Contenders, and Challengers list (“CCC list”) of 543 stocks that have paid and increased dividend for at least 5 years (some for several decades) to find those that may be currently most attractive.

Only 9 (less than 2%) passed our filters.

Here are the stocks, and then how we got them:

Baxter International Inc BAX Medical Instruments & Supplies
CMS Energy Corp CMS Utilities – Regulated Electric
DTE Energy Holding Co DTE Utilities – Regulated Electric
Energy Transfer Equity LP ETE Oil & Gas Midstream
Genuine Parts Co GPC Specialty Retail
Microchip Technology Inc MCHP Semiconductors
ONEOK Partners LP OKS Oil & Gas Midstream
Simon Property Group Inc SPG REIT – Retail
Western Gas Partners, LP WES Oil & Gas Midstream

Prior to this review, we owned BAX, GPC, OKS and ETE.  We don’t expect to invest in the others at this time. We find utilities as a category to be overvalued.

We used three different database tools to do the filter.

Filter Level 1 (258 of 543 of CCC stocks passed level 1):

[used yesterday’s end-of-day data]

  • minimum dollar volume per minute $25,000
  • price above 200-day simple moving average
  • linear regression slope of 200-day average positive
  • current 200-day average above level 10 days ago
  • price less than 2 (63-day) standard deviations above 200-day average

Filter Level 2 (showing successive reduction of the 258):

[used today’s end-of -day data]

  • Yield >= 2.5% (100 passed)
  • Consensus target price >= 1.05 times price (42 passed)
  • PEG ratio <3x (24 passed)
  • 50-day average > 200-day average (15 passed)

Filter Level 3 (showing successive reduction of the 15):

[used today’s end-of-day data]

  • 1-yr revenue growth rate >zero
  • 3-yr revenue growth rate > zero
  • 5-yr dividend growth rate >= 3%

Then we checked with the Wright’s ratings for Liquidity, Financial Strength, Profitability and Growth [explanation of rating scale here] and the Moody’s credit rating.

These are important types of data for dividend investors seeking long-term holdings.

We’d like to see investment grade for dividend stocks.  For Wright’s we would like to see BBB4 or better, and Baa or better from Moody’s.

Wright’s Moody’s
BAX ABA10 A3
CMS ACB7 Baa2
DTE ABC2 A3
ETE ADNN Ba2
GPC AAB10 n/a
MCHP AAB4 n/a
OKS ABB5 Baa2
SPG ADA5 A3
WES BBC7 Baa3

Next we looked up the year ahead rating for price behavior as rendered by ThomsonReuters StarMine through Fidelity (where over 7 is Bullish and 3 or less is Bearish).  We don’t put great stock these ratings, but is does feel moderately soothing to know if analysts look favorably.

StarMine
BAX 8.5
CMS 9.1
DTE 6.8
ETE 4.7
GPC 5.8
MCHP 8.7
OKS 4.2
SPG 3.8
WES 0.8

The we looked up the short-term technical rating of the 9 stocks as rendered by BarChart.com and StockCharts.com.  The BarChart data is self-evident in its meaning.  The StockCharts data is strong technically at 70 and above, and weak at 30 and below.

Technical ratings can be useful when deciding when to enter a position.

BarChart StockCharts
BAX 88% BUY 59.9
CMS 8% BUY 61.9
DTE 8% SELL 60.9
ETE 56% BUY n/a
GPC 80% BUY 51.6
MCHP 88% BUY 63.4
OKS 24% BUY 63.4
SPG 16% BUY 70.0
WES 32% BUY 86.0

Here is how those 9 stocks did versus the S&P 500 over the trailing 1 year:

1

23

 

 

 

 

16 Stocks That Outperform Market Fundamentally With Lower Beta

Wednesday, November 20th, 2013

Investors are increasingly worried about lack of revenue growth in the US stock market, and investors are always seeking earnings growth.  In this time period, where questions of “topping” are more frequent, investors may be seeking lower volatility stocks, just in case things go badly — and retired investors who may be selling shares to generate household operating funds are well advised to keep portfolio volatility low.

With those thoughts in mind, we asked which companies had higher revenue growth rates (“RGR”) and higher earnings growth rates (“EGR”) than the market, but also lower Beta than the market, and also better GARP (growth at a reasonable price) attributes indicated by the PEG ratio.  We used the criteria in this table and found 30 stocks that passed the filter.

img_2939

However, wanting some comfort from the careful consideration of recognized independent analysts, we reduced the list further to include only those that were rated by S&P Capital IQ and Thomson Reuters StarMine, and did not receive a rating from either below the level of Neutral. We also required that S&P Capital IQ have opined on Fair Value and did not indicate the stock was overvalued.

That knocked the list down to 16 stocks, shown in this table along with the primary filter criteria from the table above (stocks listed in alpha order by symbol).

img_2937

Stocks with links to the fundamentals and valuation page at Yahoo Finance [with the EV/EBITDA in brackets]:

This table provides the yield and 5-year dividend growth rate, worst 3 months total return, and 3-year percent standard deviation (from Principia as of Oct 31).

(click image to enlarge)

2013-11-20_values

These charts plot the dividend adjusted price of each of the 16 stocks divided by the same for the S&P 500 index ETF (SPY).

2013-11-20_A

2013-11-20_C1

2013-11-20_C

2013-11-20_D

 

Some Financial Strength Comments:  

We looked at the companies in terms of financial strength through S&P Capital IQ, Value Line and Wright’s.  They were generally in agreement that all of the companies were above average strength to one degree or the other, but had conflicting views on AutoZone, Cooper and Lorillard.

  • For AutoZone Wright’s said the strength was “Limited”, Value Line said “B” which is below average, and S&P said “B+” which is average.  Moody’s credit rating is “Baa2”.
  • For Cooper Companies Wright’s and Value Line said financial strength is “A”, but S&P said below average at “B”.  Moody’s credit rating is “Ba2”.
  • For Lorillard Wright’s said the financial strength is “D” (Fair), while Value Line said “A” and S&P Capital said “A+”.  Moodys says “Baa2”.

Conflicting Year Ahead Ratings:

We cross checked the S&P Capital IQ and Thompson Reuters StarMine ratings with Timeliness ratings from Value Line.  All three were devoid of negative ratings, except for Taiwan SemiConductor, which Value Line rated 4 on their 5 point scale (where 1 is best).

Position Disclosure:

We have positions in CVS, QCOM and UNP from the list above.

Chart

Chart-2

Chart-3

 

Slim Pickin’s Screening For Growth and Value Among Dividend Growth Stocks

Tuesday, November 19th, 2013

Dividend and dividend growth are great, and for many investors obligatory, but lack of revenue and earnings growth is a problem. A dividend portfolio needs fundamental growth at the top and bottom line.  Without that dividends cannot be relied upon for long.

There are slim pickn’s these days, which also lends some weight to those saying the market is more than fully valued, and due for a correction.  Only 3/10 of 1% of our stock universe made it through basic filters for historical revenue, earnings and dividend growth, and current yield and forward valuation filters.  That doesn’t seem like enough to us for a market that is only “fairly valued”.

Let’s see how filtering can give clues to overall market valuation, and what comes out in a prospect list for detailed consideration.

There are many other factors to consider in stock selection, but a general filter for growth is a good place to start. With that in mind, let’s look at growth sector-by-sector. Even if you do not buy individual stocks and prefer ETFs; and even if you do not seek dividends, comparing growth by sector, may be helpful to you in focusing your attention on particular sectors where growth is more prevalent.

THE RESEARCH UNIVERSE AND DATA SOURCE
Using the database available at Fidelity today, there are 4,558 stocks price of at least $5.00 per share and which are available on the New York Stock Exchange or NASDAQ.

There are only 1,351 companies (29.6%) with at least 3% revenue growth over 5, 3 and 1 years (1,948 with at least 3% growth over 5 and 3 years, but not 1 year; and 2,116 with at least 3% growth over 5 years, but not 3 or 1 years.

Of the 4,558 NYSE/NASDAQ stocks trading at $5.00 or more, 778 (17.1%) had EPS growth of 3% or more over 5, 3 and 1 years (1,368 with at least 3% growth over 5 and 3 years, but not 1 year; and 1,909 with at least 3% earnings growth over 5 years, but not 3 or 1 years).

[Note: as we go through the stats that the totals vary slightly, because the database we used is constantly being updated during the day – as a result the number of stocks passing filters vary somewhat between screens during a review session.]

Let’s look at growth by sector – first examining revenue, then earnings.

BY REVENUE
Sector-by-sector, the percentage and number of companies with at least 3% revenue growth rate over 5, 3 and 1 years are:

  • (48.5%) information technology 300 of 619
  • (44.7%) healthcare 182 of 407
  • (43.4%) consumer staples 69 of 159
  • (39.3%) energy 123 of 313
  • (37.4%) consumer discretionary 198 of 529
  • (33.4%) industrials 161 of 482
  • (29.4%) telecommunications 20 of 68
  • (24.1%) financials 225 of 937
  • (23.7%) materials 49 of 207
  • (18.1%) utilities 20 of 111

BY EARNINGS PER SHARE
Sector-by-sectors for EPS growth, the percentage and number of companies with at least 3% EPS growth over 5, 3 and 1 years are:

  • (29.6%) consumer staples 47 of 159
  • (29.1%) consumer discretionary 154 of 529
  • (24.3%) utilities 27 of 111
  • (21.8% information technology 135 of 619
  • (21.8%) industrials 105 of 482
  • (18.4%) healthcare 75 of 407
  • (17.0%) financials 159 of 937
  • (15.5%) materials 32 of 207
  • (11.5%) energy 36 of 313
  • (10.3%) telecommunications 7 of 68

BY REVENUE AND EARNINGS TOGETHER
Ideally, one would look for companies with both revenue and earnings growth meeting minimums. With both the revenue and earnings minimums combined, the population of companies for more individual review reduces to only 436 in total or 7.8% of the universe of 4,558:

  • (22.0%) consumer staples 35 of 159
  • (17.2%) consumer discretionary 91 of 529
  • (13.5%) healthcare 55 of 407
  • (13.2%) information technology 82 of 619
  • (13.1%) industrials 63 of 482
  • ( 8.3%) energy 26 of 313
  • ( 8.2%) materials 17 of 207
  • ( 6.3%) utilities 7 of 111
  • ( 6.2%) financials 58 of 937
  • ( 2.9%) telecommunications 2 of 68

ADD YIELD AND DIVIDEND GROWTH FACTOR
Of course, as conservative investors overseeing accounts in or near the retirement withdrawal stage, we would prefer some yield, to divide our total return opportunity and risk between cash in hand and capital appreciation.

By requiring our selections to have a yield of at least 2% (a tad more than the S&P 500), that population of 436 companies that had both revenue and earnings growth of at least 3% for 5, 3 and 1 year reduces to 71 companies (1.6% of the universe).

By also wanting our dividend stocks to have some payment history and some growth in dividends as well as growth in revenue and earnings, we added a 3% five-year dividend growth requirement. That reduced the population to 41 stocks (0.9% of the universe).

Not wanting to invest in any stocks that recently cut its dividend, we also required that the current year-over-year dividend payment show no decrease. That did not eliminate any stocks.

ADD PEG RATIO FACTOR
Lastly, we think that general growth at a reasonable price argument makes good sense, so we add a PEG element to the screen limiting the PEG range 0x to 2x (where the zero eliminates negative forward looking earnings estimates). That reduced the list to 13 stocks (0.3% of the universe).

  • (GPC) Genuine Parts
  • (TUP) Tuperware
  • (LO) Lorillard
  • (ARLP) Alliance Resource Partners
  • (MMP) Magellan Midstream Partners
  • (BLK) Blackrock
  • (CPSI) Computer Programs and Systems
  • (CHRW) C.H. Robinson Worldwide
  • (CPA) Copa Holdings
  • (DE) Deere
  • (HCSG) Healthcare Services Group
  • (TAL) Tal International
  • (MSFT) Microsoft

The sector representation is:

  • (1.04%) industrials 5 of 482
  • (0.64%) energy 2 of 313
  • (0.63%) consumer staples 1 of 159
  • (0.38%) consumer discretionary 2 of 529
  • (0.25%) healthcare 1 of 407
  • (0.16%) information technology 1 of 619
  • (0.11%) financials 1 of 937
  • (0.00%) materials 0 of 207
  • (0.00%) utilities 0 of 111
  • (0.00%) telecommunications 0 of 68

These low percentages add weight to the argument that the market is more than fully valued. It would seem that a higher percentage of stocks in each sector should be available with revenue, earnings and dividend growth at least a market level of yield, and a PEG ratio of 2 or less – but that is not the case today. This along with other work we do in our monthly newsletter Rational Risk Equity Income Investor, suggests slim pickin’s these days, and that is a gray cloud over the market in our view.

FILTER  DATA FOR THE 13 SURVIVORS
With that lucky “13” number (3/10 of 1% of the 4,558 stock universe), we’ll leave the rest to you to see if any other of the filter survivors are attractive and suitable for you due to these and other factors.

(click image to enlarge)

img_2934-filter

BETA FOR THE SURVIVORS

For those in the withdrawal stage of their financial lives who are also selling shares in addition to collecting dividends (or for those who may be on margin and need more stable prices on those shares on which the margin is based), and perhaps for those fearing a correction in stock prices; paying attention to Beta makes sense.

Beta  the reactivity of the stock to price changes in the S&P 500 — a value above 1.00 shows that historically when the S&P 500 moved X%, the stock moved more; and a value below 1.00 means it moved less.

(click image to enlarge)
image_2934-beta

SOME INDEPENDENT ANALYST VIEWS
There are many factors not considered in this article that you should evaluate, from this reduced research list.

To the extent that you are interested in the view of independent analyst firms, we point out that neither S&P Capital IQ nor Value Line had any below neutral opinions as to year ahead performance for any of the 13 stocks; and the aggregate opinions of  two Thompson Reuters services “StarMine” and “I/B/E/S” also have no below neutral ratings for any of those stocks.

On Fair Value, S&P Capital IQ rated DE, ARLP, MSFT and CHRW as undervalued; and CPSI, HCSG, GPC and MMP as overvalued.

Value Line rated DE, MSFT and LO as 1 or 2 (favorably)  for Timeliness, and ARLP, MMP and GPC as 4 or 5 (unfavorably) for Technical Condition.

SOME TABULAR TECHNICAL CONDITION DATA
This tabular data based on Thompson Reuters data manipulated with in-house formulas via the Metastock tool shows some important technical condition aspects of the 13 stocks.

Description of Column Headings: The first column to the right of the company name is the ratio of the market price to the 200-day moving average (greater than 1.00 is preferred). The next column is the ratio of the 200-day average divided by the average 10 days ago (to give a view of the direction of the “leading tip” of the average — greater than 1.00 means “up”).  The next column indicates whether the slope of the 252-day linear regression trend line is up or down (1 = up and 0 = down). The next column is the ratio of the 50-day average to the 200-day average (greater than 1.00 is preferred). The next column is the Relative Strength Index (more than 70 is overbought, and under 30 is oversold). The next column titled “Z-score 200” is the number of standard deviations the price is from the 200-day average (0.00 means the price is at the 200-day average — the larger the absolute value of the Z-score, the higher the probability the price will move back toward the moving average). The last column, labeled “Price Channel Position 63” shows where the price is located in the 63-day price range from its high to its low (because the range is defined on the prior day, it is possible for the current price to be above 100 or below 0 — a larger number is closer to the high and a lower number is closer to the low).

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PRICE RATE OF CHANGE DATA
This table shows the price rate of change (not total return – just price) over several time periods (5, 21, 63 and 252 days, which is 1 week, 1 month, 1 quarter and 1 year).

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POSITION DISCLOSURE:
We own BLK, TUP, GPC as of this writing.

Select S&P Sector Stocks

Monday, November 11th, 2013

Here is a simple screen based on S&P analysis.  It consists of the top 3 stocks (if any) in each of 10 sectors that pass these criteria:

  1. year ahead expected relative market performance above average (4 or 5 of 5)
  2. price versus current fair value undervalued (4 or 5 of 5)
  3. PEG ratio <= 2 and >= 0.5
  4. yield > 0
  5. ThompsonReuters StarMine year ahead expectations not negative
  6. stocks ranked by PEG from lowest to highest
  7. if there is a tie in the PEG ratio, the higher yielding stock is selected
  8. if less than 3 stocks meet criteria for a sectors only those meeting criteria are selected.

As of November 7, there are 21 stocks that meet the criteria:

Celanese Corporation CE
Comcast Corp Class A CMCSA
PetSmart Inc. PETM
Whirlpool Corporation WHR
CVS Caremark Corp CVS
Wal-Mart Stores Inc WMT
Chevron Corp CVX
National Oilwell Varco, Inc. NOV
Bank of Montreal BMO
Bank of Nova Scotia BNS
Franklin Resources Inc. BEN
Aetna Inc AET
Humana HUM
WellPoint Inc WLP
Norfolk Southern Corporation NSC
PACCAR Inc PCAR
Trinity Industries, Inc. TRN
Apple Inc AAPL
International Business Machines IBM
International Paper Co. IP
Qualcomm, Inc. QCOM

This table contains the current yield, 1-year earnings growth rate and price-to-cash flow for the screen selected companies.

(click image to enlarge)

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