Editor's Note:
David Brown, chief market strategist for Sabrient Systems, will be writing the weekly Trader’s Talk. David is a former NASA scientist, retired CEO of Telescan, Inc., and author of four books on investing. (More about David)
Sabrient is a leading provider of independent, unbiased, quantitative equity research to institutions, portfolio managers, investment advisors, and hedge funds, as well as to self-directed investors. The firm is poised to take a quantum leap forward . . . A cutting edge, proprietary platform, FSYS greatly advances Sabrient’s ability to create, build, test and execute powerful strategies. You will see some of the power of FSYS in David’s weekly Trader’s Talk column. (Visit Sabrient at
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By David Brown
Monday, June 30, 2008, 3:35 PM PDT
traderstalk@sabrient.com
There was no place to hide last week as the ugliness spread across almost the entire market. Every single style-cap lost at least 3%, with most huddling together with losses between 3% and 4%. Once again, growth was marginally better than value, and size really didn’t matter.
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Sectors
Only two sectors were in positive territory last week, with Energy boasting a gain of 1.5% and Health Care eeking out a quarter of a percent. Industrials and Financials brought up the rear, both with losses of approximately 5%.
Gold led the sub-industries performance again this week, followed by Precious Metals & Minerals. The newest precious metal, Coal, entered the picture, along with two oil & gas sub-industries. Not surprisingly, the worst performers were two financial groups, a couple of retail categories (not shown), and Casinos & Gaming, which suffered the most with a double-digit loss for the week.
Forward-Looking Sector Rankings
Our forward look at sectors is much the same as last week, with Energy again on top by a wide margin, Consumer Staples at the bottom, and some minor shuffling in the middle.
As June comes to an end, two questions continue to plague us: How high will oil prices rise? How low will financial prices sink?
Many believe that oil prices will not remain at current levels. Hence, a number of energy stocks appear reasonably priced. On the other hand, there is nothing that says the top has been reached, and if that is the case, energy stocks could look cheap indeed at current prices.
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With regard to the Financial sector, we thought that the last several quarters surely had given all players sufficient time to confess their sins, but each week brings more mea culpas and negative prognostications. With the entire sector down a startlingly 50% from last year’s high, one would think the bottom is near, at least for those who did not participate in the subprime excesses. Frankly, we’re not seeing that. Witness last week’s 4.5% decline in the entire sector.
Stocks to Consider
One last thought: When market gloom seems at its worst, it has been historically the best time to start buying.
Two of the three stocks that QMAXX found last week are up significantly since last Monday’s (6/23) close – GSI, in the Materials sector, gained approximately 15% as of close on 6/30, and TTES, an Energy stock, gained about 7%. WRES was up nicely intra-day on Monday, but finished the day with a loss of almost 2% since last Monday. It’s been volatile, but still looks good. In fact, all three stocks still look really good as small-cap growth stocks in our QMAXX system.
However, if you’d like some new ideas, take a look at Natural Gas Services (AMEX: NGS) in the Energy sector or Innophos Holdings (NASDAQ: IPHS) in the Materials sector. Or, if you’d like to take a flyer on a couple of foreign firms, look at Kazakhstan’s BMB Munai (AMEX: KAZ) in Energy or China’s Shengda Tech (NASDAQ: SDTH) in Materials.
David Brown
Chief Market Strategist
About This Newsletter
Our goal in this newsletter is to use Sabrient’s quantitative methodology to provide the best hunting ground for styles, caps, and sectors for both longs and shorts – and to provide guidance in areas where you may want to be cautious versus aggressive in your portfolio. In the very near future, we will be using our FSYS platform to produce a look-ahead for the next 1 to 3 months of the most likely performance expected from these styles, caps and sectors.
Also, this newsletter is for you. So we welcome your suggestions as to information you would like to see included in this newsletter. You can send your suggestions to traderstalk@sabrient.com.
