RSSThe Quant View: Unprecedented Market Behavior
By David Brown | October 21, 2008 | 11:44 AM | 0 Comments
From a sector viewpoint Energy trounced the others (see discussion below) while the Telecom sector did well, as did Health Care and Consumer Staples, both of which, as we pointed out earlier, are favorites in a recessionary environment.
Poor performances were generated by Consumer Discretionary (read “Homebuilding), Materials, which was down slightly, with Industrials and Technology in the middle of the pack.
Returning to the Energy Sector, its performance confirmed many weeks of #1 status in our forward- looking sector rankings. Last week, Energy produced unweighted returns in excess of 12% and weighted returns of nearly 8%. As indicated the above discussion of low forward P/E’s, many of the energy companies have P/E’s below 5. That is especially enticing, considering that both Presidential candidates strongly advocate substantial increases in domestic exploration. This sector should provide a fertile shopping ground for well-priced bargains.
Best & Worst Performance in Sub-industries
Not surprisingly, four of the top performers in sub-industries were energy-related, generating returns a high as 24% for the week. At the very top was Airlines (up 30% for the week); airlines, of course, thrive in a low-priced energy environment. Gold and Office REITS did terribly, which should come as no surprise.
Forward-Looking Sector Rankings
If all that isn’t enough to whet your appetite, Energy continues to lead all sectors in our forward-looking rankings (below). Moreover, the margins are greater than previously, due in part to the attractive valuations we talked about.
While Health Care is last on the list, consider that this industry includes biotechnology, whose valuations are frequently unrelated to current earnings, and a large number of smaller emerging medical companies that do not have any current earnings. Also, the Health Care Sector is a favorite refuge for investors in recessionary periods, so we should at least consider bargain-hunting among profitable suppliers of health care services.
Wrapping Up
I’d like to wrap up by leaving you with some juicy, low-forward-P/E picks from the Energy sector to consider, based on a QMAXX search. They all have Sabrient Value Scores in the 90’s, as well as good Sabrient Growth Scores, and all had a big day on Monday.
ATP Oil & Gas (NSDQ: ATPG) – Small Cap
CGG Veritas (NYSE: CGV) – Mid Cap
Nexen (NYSE: NXY) – Large Cap
Content is from the 10/21/08 Trader's Talk newsletter.
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