The Quant View: The Return of Small Caps and Financials

By David Brown | September 03, 2008 | 12:00 AM | 1 Comment

Current Sector Performance:

The financial sector was the big winner by far last week, gaining nearly 2.5% for the week. Energy, telecom, and materials also put in good performances, particularly in small caps. If you consider only small-cap stocks, materials led the sectors for the week, followed by energy and financials. As we had forecast in last week’s newsletter, information technology brought up the rear with an embarrassing 2.3% drop. That loss was shared by both the small-cap and large-cap constituents in that sector.

 

Best and Worst Performance in Sub-Industries

Among sub-industries, again financial companies led, specifically, the thrifts & mortgage finance group, which was up a startling 8.8%. Close on its heels were the oil & gas refining and marketing group and casinos and gaming, each up more than 6%. Internet retailers were the big losers, with a loss of more than 5%. The computer hardware industry was down more than 3.5% and, somewhat surprisingly, the soft drinks group was the third worst performing sub-industry, down 3%.

 

Forward-Looking Sector Rankings

Looking ahead, energy continues to have the best scores, according to the Sabrient system, followed by materials, utilities and financials (although large-cap telecoms continue to score well). Health care, consumer staples, and information technology remain weak.

 

Wrapping Up

I continue to favor small-cap financial stocks, along with small-cap energy and material companies, and, as I said last week, large-cap investors might want to consider a small allocation to telecom stocks. Sectors to avoid, once again, include health care, consumer staples, and information technology.

Using this week’s analysis as a basis for input into the QMAXX artificial intelligence system, here are some stocks to consider:

Sterling Financial (NSDQ: STSA) – Financial, Small-cap
Americredit (NYSE: ACF) – Financial, Small-cap
USEC Inc. (NYSE: USU) – Energy, Small-cap
Vimpel Communications ADR (NYSE: VIP) – Telecom, Large-cap

 

 

Content excerpted from the 09/03/08 Trader's Talk newsletter.

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Russian Telecom Play Love Vimpelcom. Russian's are just on the cusp of a massive telecom buildout. This got bid up earlier in 08 but has since pulled back. I like the idea here. Submitted by Anonymous (not verified) on Wed, 2008/09/03 - 3:22am » reply |