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WiserTrader Monthly |
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May 2007 Prescott, Arizona Systems@WiserTrader.com __________________________________________________________________________
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Ranking Industries |
Ranking IndustriesJames A. Andrews May 15, 2007
___________________________________________________________________________ A promise was made to focus on broader industry issues. Industry rankings are useful to the short-term trader. Leading and lagging industry lists explain how industries have performed on a relative basis. However, these lists say little about how industries have performed in absolute terms, how their rankings are currently changing relative to one another and how rankings are likely to emerge in the near future. This month, the newsletter explains how to gather this information quickly to identify the leading companies in leading industries. ___________________________________________________________________________
1.0 Industry Rank
Two factors are taken into account when industries are ranked at this website. About 90% of an industry’s rank is weighted by the percent increase in its index price over the previous 4 weeks and 10% is weighted by how much the index is oversold based on its 10-period Williams-%R. This definition is used for a trend following trading system with a two to ten day options trading period. Other criteria for industry performance can be defined for different trading systems and periods.
Industries are ranked from a high of 1 to a low of 215 based on a list of 215 industries that is maintained at Yahoo Finance. The Yahoo industry classification provides a finer breakdown of major sectors by a factor of one and a half to two compared with other classification systems. This has certain advantages. For example, last week the personal computer industry was ranked 11 out of 215 while computer based systems was ranked near the bottom at 203. Placing all computer companies into one industry index can give an incomplete picture.
There are some disadvantages also. Yahoo is still learning how to maintain its industry classification system. Stock splits cause the system to break down, skewing a composite index value by more than 50%. It is obvious when this occurs and requires checking. A one-day move from the first to the last position is a sure tip off. On May 10th, Trucks & Other Vehicles suddenly dropped by 59%. It turns out that Volvo had undergone a stock split. It takes several days for a composite index value to be corrected. This is the only major drawback found so far in using this system.
The main reason for using this classification system is the ready availability of industry performance. Each industry’s performance is accessible through online data retrieval software that imports the numbers directly from Yahoo Finance into a spreadsheet where they can be manipulated. Industry index values are updated continuously throughout the trading day. Industries can easily be ranked in the spreadsheet, as shown for the 40 leading industries in Table 1 and the 40 lagging industries in Table 2. The leftmost column is the rank. The second column from the left is discussed below. The third column from the left is the industry number. To the right of the industry name are five columns that show the percentage gain for each of the 4 previous weeks and finally for the entire month at the far right.
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Table 1
Leading Industries
May 14, 2007
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Rank |
Change in Rank |
No. |
Leading Industries |
1 wk Ago Gain |
2 wks Ago Gain |
3 wks Ago Gain |
4 wks Ago Gain |
1 mo Gain |
|
1 |
51 |
712 |
Aluminum |
-0.7% |
17.9% |
4.2% |
-1.6% |
20.0% |
|
2 |
46 |
718 |
Appliances |
0.4% |
5.6% |
7.0% |
1.3% |
14.9% |
|
3 |
77 |
894 |
Semiconductor - Specialized |
-0.3% |
2.6% |
1.4% |
3.3% |
7.2% |
|
4 |
91 |
815 |
Heavy Construction |
7.5% |
3.9% |
-2.0% |
2.1% |
11.7% |
|
5 |
33 |
879 |
Personal Computers |
2.1% |
3.5% |
4.5% |
0.2% |
10.6% |
|
6 |
2 |
846 |
Toy & Hobby Stores |
0.8% |
3.9% |
0.6% |
3.4% |
8.9% |
|
7 |
103 |
844 |
Catalog & Mail Order Houses |
-0.2% |
0.6% |
8.7% |
-2.6% |
6.2% |
|
8 |
89 |
724 |
Sporting Goods |
-0.1% |
-0.5% |
2.5% |
5.2% |
7.1% |
|
9 |
56 |
833 |
Publishing - Periodicals |
-1.6% |
10.9% |
-0.3% |
0.8% |
9.7% |
|
10 |
26 |
806 |
Small Tools & Accessories |
0.3% |
3.1% |
3.9% |
1.2% |
8.6% |
|
11 |
66 |
809 |
Textile Industrial |
0.8% |
2.1% |
-0.5% |
3.2% |
5.8% |
|
12 |
47 |
864 |
Consumer Services |
-1.0% |
2.2% |
2.5% |
-0.8% |
2.9% |
|
13 |
61 |
780 |
Mortgage Investment |
-0.1% |
3.0% |
0.3% |
3.4% |
6.7% |
|
14 |
11 |
741 |
Processed & Packaged Goods |
-0.9% |
2.3% |
-0.4% |
1.6% |
2.6% |
|
15 |
13 |
817 |
Waste Management |
-0.1% |
2.5% |
3.7% |
1.8% |
8.1% |
|
16 |
118 |
892 |
Semiconductor - Broad Line |
1.3% |
2.3% |
0.2% |
3.8% |
7.8% |
|
17 |
27 |
813 |
Cement |
-2.5% |
6.8% |
-0.8% |
-1.0% |
2.3% |
|
18 |
6 |
717 |
Conglomerates |
-1.1% |
1.8% |
4.3% |
-0.3% |
4.7% |
|
19 |
34 |
843 |
Auto Parts Stores |
0.4% |
-0.2% |
-0.3% |
2.0% |
2.0% |
|
20 |
8 |
834 |
Publishing - Books |
2.1% |
3.8% |
1.5% |
1.4% |
9.1% |
|
21 |
29 |
744 |
Confectioners |
-4.1% |
0.7% |
4.1% |
1.4% |
2.0% |
|
22 |
87 |
747 |
Beverages - Soft Drinks |
-2.0% |
2.5% |
0.8% |
2.1% |
3.4% |
|
23 |
143 |
877 |
Railroads |
1.2% |
2.3% |
1.8% |
2.1% |
7.5% |
|
24 |
35 |
810 |
Residential Construction |
-1.9% |
-0.2% |
-0.6% |
4.7% |
1.9% |
|
25 |
104 |
784 |
Drug Manufacturers - Other |
-2.3% |
2.1% |
1.1% |
0.7% |
1.6% |
|
26 |
40 |
887 |
Security Software & Services |
-0.8% |
2.1% |
5.9% |
-0.8% |
6.5% |
|
27 |
106 |
876 |
Shipping |
0.0% |
2.7% |
1.5% |
3.0% |
7.4% |
|
28 |
131 |
708 |
Oil & Gas Equipment & Services |
0.6% |
2.2% |
1.7% |
-2.9% |
1.4% |
|
29 |
85 |
801 |
Farm & Construction Machinery |
2.4% |
1.7% |
-0.6% |
4.9% |
8.6% |
|
30 |
139 |
711 |
Copper |
-0.1% |
7.0% |
-3.8% |
3.7% |
6.7% |
|
31 |
12 |
878 |
Diversified Computer Systems |
2.3% |
2.1% |
3.6% |
-0.2% |
8.0% |
|
32 |
25 |
812 |
Lumber, Wood Production |
-1.8% |
6.3% |
0.3% |
-0.4% |
4.2% |
|
33 |
84 |
785 |
Drugs - Generic |
-1.6% |
4.5% |
0.5% |
-1.5% |
1.7% |
|
34 |
41 |
814 |
General Building Materials |
-1.2% |
5.0% |
0.4% |
2.0% |
6.2% |
|
35 |
16 |
800 |
Aerospace/Defense Products & Serv |
1.4% |
2.8% |
0.6% |
2.9% |
7.8% |
|
36 |
119 |
769 |
Accident & Health Insurance |
-0.1% |
4.9% |
1.5% |
0.8% |
7.2% |
|
37 |
10 |
782 |
Real Estate Development |
-1.4% |
1.5% |
0.9% |
1.5% |
2.5% |
|
38 |
81 |
807 |
Metal Fabrication |
1.8% |
4.4% |
-2.0% |
2.4% |
6.6% |
|
39 |
49 |
738 |