RSSSmall-Caps are the Place to Be
By David Brown | June 24, 2008 | 8:06 PM | 2 Comments
Within the sectors, the only positive haven for the entire week was the Materials Sector, up 0.4%. Despite a couple of days of falling oil prices, Energy lost less than one percent and was second in performance behind Materials. Health Care and Utilities took the next two spots, continuing to reflect the market’s belief that a recessionary period is upon us.
At the other end of the spectrum, the Telecommunications and Consumer Discretionary sectors suffered a very poor week, both falling more than 4%. And, despite recent attempts to climb out of the doldrums, Financials lost another 3.8%.
Sub-Industries
Sub-industries were led by Gold, at 3.9%, which very often occurs in a bear market. Marine, Education Services, Oil & Gas Equipment, and the recently reliable Fertilizers & Agricultural Chemicals also made the top five, each gaining more than 2.5% for the week.
Starting this week, I’m including the sub-industries to avoid. This week, those are Managed Health Care, Consumer Finance, and Movies & Entertainment. The latter is somewhat surprising, as entertainment usually does quite well during a recessionary period. Maybe gas prices are so high that people are huddling in their caves watching movies on cable TV, rather than going out to theaters or DVD stores.
Forward-Looking Sector Rankings
Looking forward one month, our quant system prognosis on sectors is quite stable, with Energy remaining on top and Consumer Staples at the bottom. Financials have moved up yet another notch to the sixth spot, which makes me think that sector is ripe for nibbling. Sectors to avoid would clearly be Telecommunication Services, which has fallen four notches from last week, and of course, Consumer Staples at the bottom of the heap.
At this time, the appropriate place to shop might be small-cap growth stocks in the Energy or Materials sectors. Using our QMAXX engine, I searched the Energy and Materials sectors in the small-gap growth index and found three stocks you might like to look at:
General Steel Holdings (NYSE: GSI) - Materials
T-3 Energy Services (NSDQ: TTES) - Energy
Warren Resources (NSDQ: WRES) - Energy
* Content excerpted from the 6-24-08 Trader's Talk newsletter
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