WiserTrader Monthly

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September 2007                          Prescott, Arizona                     Contact Editor

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Published the 3rd Tuesday of the month

 

 

 

 

 

 

 

 

Industry Rankings for September

 

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     Top down stock picking based on sector and industry rankings should be supplemented with additional fundamental and chart analysis.  Using a small amount of additional information, this issue begins building a new portfolio.

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1.0 Leading Sectors and Industries

 

     Sector and industry rankings are determined by the percent increase in industry index prices over the previous 4 weeks.  Industry rank ranges from a high of 1 to a low of 215 based on a list of 215 industries in the Yahoo Finance industry classification system. 

 

     The leading sectors, based on their past month’s performance, are listed in Table 1A.

 

 

 

Table 1A

Sector Rank

Rank

Sector

1 Month

1

Basic Materials

13.9%

2

Energy

11.6%

3

Consumer Non-cyclical

8.1%

4

Conglomerates

7.1%

5

Transportation

6.7%

6

Utilities

6.0%

7

Technology

5.2%

8

Services

4.8%

9

Healthcare

3.7%

10

Financial

3.5%

11

Consumer Cyclical

3.3%

12

Industrial Goods

3.3%

 

 

     The leading industries for the past month are ranked in Table 1B.  The leftmost column is the rank based on the previous 4-week percentage change.  The second column from the left is ranked by the number of positions an industry is above or below its 4-week average rank.  The third column from the left is the average of the first two columns.  Clicking on the industry name takes you to an industry summary page.  The “C’s” will display the companies in the industry.  The last three columns on the right are the percentage gains for the previous trading day, the previous week and the previous four weeks.

 

     We have commented before that a 1-day change of 15% or more in an industry’s index value can be caused by splits, mergers or acquisitions.  It has been explained to Yahoo that index values should be recalculated as the 4th root of the combined company market cap on each page access.  Yahoo has agreed to implement the solution but it may take some time.  Two leading industries having this problem are Beverages-Brewers and Wireless Communication.  A lagging industry having the problem is Diversified Communications Services.  These three industries should be discounted.

 

 

 

 

 

 Table 1B

Leading Industries

September 18, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

1

7

4

Beverages - Brewers

C's

2.3%

36.1%

42.5%

2

56

29

Wireless Communications

C's

3.1%

19.9%

27.9%

3

10

7

Gold

C's

4.3%

5.7%

25.2%

4

11

8

Copper

C's

5.1%

8.4%

24.8%

5

96

51

Resorts & Casinos

C's

3.2%

9.6%

22.0%

6

20

13

Industrial Metals & Minerals

C's

6.2%

4.6%

20.4%

7

24

16

Major Airlines

C's

4.6%

2.3%

18.4%

8

82

45

Music & Video Stores

C's

5.0%

10.4%

17.6%

9

21

15

Oil & Gas Refining & Marketing

C's

3.7%

4.8%

17.0%

10

103

57

Sporting Goods Stores

C's

4.1%

6.7%

16.9%

11

79

45

Technical Services

C's

3.8%

6.0%

16.1%

12

62

37

Nonmetallic Mineral Mining

C's

3.5%

2.6%

15.8%

13

1

7

Silver

C's

3.0%

0.9%

14.7%

14

25

20

Independent Oil & Gas

C's

3.6%

5.8%

14.3%

15

28

22

Air Services, Other

C's

2.3%

2.6%

14.1%

16

87

52

Agricultural Chemicals

C's

3.1%

5.4%

14.0%

17

64

41

Oil & Gas Equipment & Services

C's

3.4%

3.6%

13.8%

18

46

32

Catalog & Mail Order Houses

C's

2.0%

3.7%

12.9%

19

123

71

REIT - Healthcare Facilities

C's

2.1%

6.5%

12.5%

20

39

30

Steel & Iron

C's

7.0%

-6.0%

12.1%

21

108

65

Dairy Products

C's

1.4%

0.2%

11.6%

22

26

24

Jewelry Stores

C's

4.1%

5.3%

11.4%

23

120

72

Internet Service Providers

C's

2.9%

6.0%

10.9%

24

137

81

Recreational Goods, Other

C's

4.2%

1.3%

10.7%

25

16

21

Closed-End Fund - Foreign

C's

2.8%

3.3%

10.7%

26

57

42

Personal Computers

C's

2.2%

2.9%

10.6%

27

34

31

Major Integrated Oil & Gas

C's

3.4%

4.5%

10.5%

28

30

29

Synthetics

C's

4.0%

4.6%

10.4%

29

14

22

Metal Fabrication

C's

6.0%

5.0%

10.4%

30

49

40

Broadcasting - Radio

C's

1.4%

2.0%

10.2%

31

53

42

Farm Products

C's

1.7%

0.6%

10.1%

32

65

49

Telecom Services - Foreign

C's

4.0%

4.0%

9.7%

33

36

35

Home Improvement Stores

C's

3.1%

4.9%

9.6%

34

45

40

Toys & Games

C's

3.2%

6.0%

9.5%

35

31

33

Foreign Utilities

C's

3.6%

3.3%

9.5%

36

71

54

Aluminum

C's

3.0%

3.0%

9.3%

37

22

30

Oil & Gas Drilling & Exploration

C's

2.7%

3.4%

9.3%

38

69

54

Communication Equipment

C's

3.8%

1.8%

9.3%

39

2

21

Housewares & Accessories

C's

4.5%

11.1%

9.1%

40

52

46

Electronics Stores

C's

4.8%

8.1%

9.1%

 

 

     The top 20 leading industries are plotted in Figure 1.

 

 

 

FIGURE 1

 

 

 

 

2.0 Industries Rising in Rank

 

     Table 2A contains the industries that are moving up in position the fastest.  The 20 fastest rising in rank are plotted in Figure 2.

 

 

 

 

 Table 2A

Industries Advancing in Rank the Fastest

September 18, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

13

1

7

Silver

C's

3.0%

0.9%

14.7%

39

2

21

Housewares & Accessories

C's

4.5%

11.1%

9.1%

71

3

37

Toy & Hobby Stores

C's

5.9%

10.7%

6.3%

83

4

44

Publishing - Books

C's

5.5%

3.0%

5.8%

51

5

28

Foreign Money Center Banks

C's

5.7%

6.5%

7.8%

88

6

47

Regional Airlines

C's

3.6%

0.6%

5.2%

1

7

4

Beverages - Brewers

C's

2.3%

36.1%

42.5%

59

8

34

Basic Materials Wholesale

C's

3.2%

4.6%

7.3%

107

9

58

Real Estate Development

C's

5.3%

6.3%

4.3%

3

10

7

Gold

C's

4.3%

5.7%

25.2%

4

11

8

Copper

C's

5.1%

8.4%

24.8%

86

12

49

Auto Manufacturers - Major

C's

1.7%

3.0%

5.4%

103

13

58

Foreign Regional Banks

C's

5.5%

3.9%

4.5%

29

14

22

Metal Fabrication

C's

6.0%

5.0%

10.4%

89

15

52

Discount, Variety Stores

C's

3.6%

4.8%

5.1%

25

16

21

Closed-End Fund - Foreign

C's

2.8%

3.3%

10.7%

68

17

43

Electronic Equipment

C's

2.0%

1.7%

6.5%

55

18

37

Consumer Services

C's

2.7%

3.3%

7.5%

63

19

41

Investment Brokerage - National

C's

5.1%

7.0%

7.1%

6

20

13

Industrial Metals & Minerals

C's

6.2%

4.6%

20.4%

9

21

15

Oil & Gas Refining & Marketing

C's

3.7%

4.8%

17.0%

37

22

30

Oil & Gas Drilling & Exploration

C's

2.7%

3.4%

9.3%

72

23

48

Textile - Apparel Footwear & Accessories

C's

3.8%

4.8%

6.3%

7

24

16

Major Airlines

C's

4.6%

2.3%

18.4%

14

25

20

Independent Oil & Gas

C's

3.6%

5.8%

14.3%

22

26

24

Jewelry Stores

C's

4.1%

5.3%

11.4%

104

27

66

Railroads

C's

4.6%

5.3%

4.5%

15

28

22

Air Services, Other

C's

2.3%

2.6%

14.1%

70

29

50

Information & Delivery Services

C's

2.4%

4.3%

6.3%

28

30

29

Synthetics

C's

4.0%

4.6%

10.4%

35

31

33

Foreign Utilities

C's

3.6%

3.3%

9.5%

58

32

45

Paper & Paper Products

C's

2.9%

3.0%

7.3%

97

33

65

Farm & Construction Machinery

C's

4.4%

3.8%

4.8%

27

34

31

Major Integrated Oil & Gas

C's

3.4%

4.5%

10.5%

133

35

84

Textile - Apparel Clothing

C's

5.2%

4.8%

3.3%

33

36

35

Home Improvement Stores

C's

3.1%

4.9%

9.6%

92

37

65

Long-Term Care Facilities

C's

1.6%

0.8%

4.9%

62

38

50

Conglomerates

C's

3.5%

5.1%

7.1%

20

39

30

Steel & Iron

C's

7.0%

-6.0%

12.1%

93

40

67

Semiconductor- Memory Chips

C's

3.5%

-2.1%

4.8%

 

 

FIGURE 2

 

 

 

3.0 Industries Falling in Rank

 

     A list of the industries declining in rank the fastest is given in Table 3A.  The 20 fastest declining in rank are plotted in Figure 3.

 

 

 

 

 Table 3A

Industries Declining in Rank the Fastest

September 18, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

155

176

166

Security & Protection Services

C's

3.1%

1.8%

2.5%

197

177

187

Rental & Leasing Services

C's

3.4%

0.0%

-0.9%

184

178

181

Specialty Retail, Other

C's

4.0%

3.3%

0.4%

168

179

174

Home Health Care

C's

1.8%

2.4%

2.0%

158

180

169

REIT - Hotel/Motel

C's

2.5%

3.5%

2.4%

195

181

188

Publishing - Newspapers

C's

1.2%

0.3%

-0.4%

108

182

145

Health Care Plans

C's

1.5%

2.5%

4.3%

200

183

192

Medical Practitioners

C's

1.5%

-0.5%

-1.3%

211

184

198

Sporting Goods

C's

1.9%

0.5%

-4.0%

186

185

186

Appliances

C's

2.4%

0.4%

0.3%

135

186

161

REIT - Diversified

C's

3.9%

5.2%

3.3%

136

187

162

Closed-End Fund - Debt

C's

1.5%

-0.2%

3.2%

203

188

196

Heavy Construction

C's

3.3%

4.0%

-1.8%

208

189

199

Trucking

C's

4.4%

3.2%

-3.1%

167

190

179

Confectioners

C's

2.1%

1.8%

2.0%

144

191

168

Cigarettes

C's

1.6%

1.2%

3.0%

138

192

165

Regional - Mid-Atlantic Banks

C's

3.9%

4.9%

3.2%

111

193

152

Diagnostic Substances

C's

1.0%

1.3%

4.1%

180

194

187

Healthcare Information Services

C's

2.1%

3.0%

1.0%

159

195

177

Industrial Equipment Wholesale

C's

3.9%

1.3%

2.4%

209

196

203

Wholesale, Other

C's

3.1%

-0.8%

-3.5%

201

197

199

Rubber & Plastics

C's

4.4%

2.5%

-1.5%

174

198

186

Regional - Midwest Banks

C's

4.5%

5.4%

1.3%

202

199

201

Insurance Brokers

C's

1.7%

-1.8%

-1.5%

151

200

176

Research Services

C's

2.2%

1.0%

2.8%

116

201

159

Data Storage Devices

C's

2.2%

-1.3%

4.0%

213

202

208

Office Supplies

C's

4.1%

2.7%

-7.4%

163

203

183

Money Center Banks

C's

4.2%

4.9%

2.2%

196

204

200

Semiconductor - Specialized

C's

4.0%

0.5%

-0.4%

171

205

188

Regional - Southeast Banks

C's

4.3%

4.3%

1.6%

172

206

189

REIT - Office

C's

3.2%

5.0%

1.6%

141

207

174

Savings & Loans

C's

3.9%

5.4%

3.1%

162

208

185

Meat Products

C's

-0.2%

-2.4%

2.2%

207

209

208

Drugs Wholesale

C's

2.3%

-1.9%

-2.8%

173

210

192

REIT - Residential

C's

2.6%

2.8%

1.5%

187

211

199

Regional - Pacific Banks

C's

3.6%

3.2%

0.2%

177

212

195

Management Services

C's

1.0%

-0.4%

1.1%

182

213

198

Property & Casualty Insurance

C's

2.5%

2.2%

0.8%

169

214

192

Regional - Southwest Banks

C's

4.2%

4.5%

1.9%

194

215

205

Food Wholesale

C's

2.5%

1.3%

-0.2%

 

 

FIGURE 3

 

 

 

4.0 Lagging Industries

 

     Lagging industries for the past month are listed in Table 4A.  A chart showing the rank performance of the 20 worst ranked is shown in Figure 4.

 

 

 

 

 Table 4A

Lagging Industries

September 18, 2007

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

176

102

139

Marketing Services

C's

1.4%

-1.1%

1.1%

177

212

195

Management Services

C's

1.0%

-0.4%

1.1%

178

161

170

Auto Parts Stores

C's

4.4%

2.9%

1.1%

179

119

149

Department Stores

C's

5.7%

6.8%

1.1%

180

194

187

Healthcare Information Services

C's

2.1%

3.0%

1.0%

181

93

137

Cement

C's

5.7%

0.1%

0.9%

182

213

198

Property & Casualty Insurance

C's

2.5%

2.2%

0.8%

183

147

165

Advertising Agencies

C's

2.9%

-0.1%

0.6%

184

178

181

Specialty Retail, Other

C's

4.0%

3.3%

0.4%

185

101

143

Gaming Activities

C's

2.7%

3.5%

0.3%

186

185

186

Appliances

C's

2.4%

0.4%

0.3%

187

211

199

Regional - Pacific Banks

C's

3.6%

3.2%

0.2%

188

173

181

Air Delivery & Freight Services

C's

2.1%

1.9%

0.1%

189

167

178

Drugs - Generic

C's

2.2%

1.3%

0.1%

190

89

140

Hospitals

C's

2.1%

1.8%

0.0%

191

141

166

General Contractors

C's

3.9%

0.3%

-0.1%

192

129

161

Textile Industrial

C's

3.3%

2.8%

-0.2%

193

139

166

Information Technology Services

C's

1.9%

-0.4%

-0.2%

194

215

205

Food Wholesale

C's

2.5%

1.3%

-0.2%

195

181

188

Publishing - Newspapers

C's

1.2%

0.3%

-0.4%

196

204

200

Semiconductor - Specialized

C's

4.0%

0.5%

-0.4%

197

177

187

Rental & Leasing Services

C's

3.4%

0.0%

-0.9%

198

170

184

Home Furnishings & Fixtures

C's

2.2%

1.7%

-1.1%

199

100

150

Building Materials Wholesale

C's

6.6%

5.7%

-1.3%

200

183

192

Medical Practitioners

C's

1.5%

-0.5%

-1.3%

201

197

199

Rubber & Plastics

C's

4.4%

2.5%

-1.5%

202

199

201

Insurance Brokers

C's

1.7%

-1.8%

-1.5%

203

188

196

Heavy Construction

C's

3.3%

4.0%

-1.8%

204

140

172

Processing Systems & Products

C's

0.9%

-0.4%

-1.8%

205

152

179

Mortgage Investment

C's

4.8%

4.4%

-1.9%

206

121

164

Surety & Title Insurance

C's

6.4%

7.0%

-2.2%

207

209

208

Drugs Wholesale

C's

2.3%

-1.9%

-2.8%

208

189

199

Trucking

C's

4.4%

3.2%

-3.1%

209

196

203

Wholesale, Other

C's

3.1%

-0.8%

-3.5%

210

112

161

Residential Construction

C's

6.2%

11.1%

-3.6%

211

184

198

Sporting Goods

C's

1.9%

0.5%

-4.0%

212

174

193

Staffing & Outsourcing Services

C's

2.9%

0.1%

-5.7%

213

202

208

Office Supplies

C's

4.1%

2.7%

-7.4%

214

159

187

Recreational Vehicles

C's

3.8%

2.8%

-9.8%

215

111

163

Diversified Communication Services

C's

3.4%

5.5%

-28.4%

 

 

FIGURE 4

 

 

 

 

 

     It is important to remember that the usefulness of industry ranking depends on how each industry is actually performing.  When the market performs poorly, the leading industry could very well be the one that declines the least.  An industry could be doing nothing price wise but could end up near the top or bottom of the ranking list because other industries might be doing extremely poorly or well.  There is not enough information in an industry’s ranking list alone to infer how the industry index has actually changed over time.  There is no substitute for looking at the actual percentage change of an index for the industry of interest. 

 

     Industries ranked according to how much their rank positions have changed from their average is a strong indicator of future industry leadership.  This indicator also confirms how well a leading industry is maintaining its position. 

 

    The spreadsheet from which the charts and tables were obtained is available as a free download.  It is named the “industries” spreadsheet and is obtained by clicking on the Excel Files link.  The industries spreadsheet gives you performance values for all 215 industries on a single page.  The “companies” spreadsheet, used to view performance of all the companies in an industry, is downloaded from the same web page.  XLQPlus is required. 

 

 

 

 

5.0 Top-Down Portfolio

 

     In this section we begin to build a top-down portfolio consisting of selected leading and emerging industries.  Stocks are selected, in part, based on their past month price performance that comes directly from the “companies” spreadsheet.  Also included are growth over the past year in market share, sales and earnings.  Data comes from a modified version of the “companies” spreadsheet that links to the AAII Stock Investor Pro database. 

 

     Ten industries ranked by the average of the two left-most columns are listed in Table 5A.  We will ignore Beverages-Brewers due to a suspicious large 1-day change in its index value.  Basic materials and energy sectors contain the majority of leading and emerging industries.  Focusing on these two commodity sectors, stock selections are limited to companies for which adequate information is available.  Excluded companies are traded mostly on over the counter exchanges. 

 

 

 

 Table 5A

Leading and Rising Industries

September 18, 2007

 

Sector

Rank [R]

Rank of Change   [C]

(R+C)/2

Industries

Companies

Last Gain

1 wk Ago Gain

1 mo Gain

Consumer Noncyclical

1

7

4

Beverages - Brewers

C's

2.3%

36.1%

42.5%

Basic Materials

3

10

7

Gold

C's

4.3%

5.7%

25.2%

Basic Materials

13

1

7

Silver

C's

3.0%

0.9%

14.7%

Basic Materials

4

11

8

Copper

C's

5.1%

8.4%

24.8%

Basic Materials

6

20

13

Industrial Metals & Minerals

C's

6.2%

4.6%

20.4%

Energy

9

21

15

Oil & Gas Refining & Marketing

C's

3.7%

4.8%

17.0%

Transportation

7

24

16

Major Airlines

C's

4.6%

2.3%

18.4%

Energy

14

25

20

Independent Oil & Gas

C's

3.6%

5.8%

14.3%

Consumer Cyclical

39

2

21

Housewares & Accessories

C's

4.5%

11.1%

9.1%

Financial

25

16

21

Closed-End Fund - Foreign

C's

2.8%

3.3%

10.7%

 

 

 

 

     In the gold industry, Lihir Gold Ltd. (LIHR) is ranked 9th for the week and 4th for the month.  It increased its share of the gold market over the past year from 1.1% to 3.4%.  Its sales growth increased 38% over that period and its profits grew by 64%.  IAMGOLD Corp. (IAG) is ranked only 18th for the week and 29th for the month.  It increased its share of the gold market from 1.1% to 2.4% over the past year.  Its sales growth increased 133% over that period and its profits grew by 289%.  These were the most outstanding stocks based on the above criteria.

 

     In the silver industry, Pan American Silver Corp. (PAAS) is ranked 6th for the week and 3rd for the month.  It had the highest increase in market share over the year, going from 27.7% to 33.2% of the silver market.  Sales growth increased 108.7% over that period and its profits grew by 268.9%.

 

     In the copper industry, Freeport-McMoRan Copper & Gold (FCX) is ranked 1st for the week and 1st for the month.  It had the highest increase in market share over the year, going from 31.8% to 61.4% of the copper market.  Sales growth increased 108.7% over that period and its profits grew by 41.3%.

 

     The industrial metals & minerals industry, like gold, has a much larger number of companies than adequate data can be found for.  BHP Billiton Ltd. (BHP) ranked 19th for the week and 10th for the month.  It had the highest increase in market share over the year, going from 52.7% to 59.8% of the industrial metals and minerals market.  Sales growth increased 20.3% over that period and its profits grew by 55%.

 

     In the oil & gas refining and marketing industry, Petroleo Brasileiro (PBR) ranked 12th for the week and 2nd for the month.  It had the highest increase in market share over the year, going from 13.9% to 15.2% of the oil & gas refining and marketing market.  Sales increased 28.4% over that period and its profits grew by 24%.

 

     In the independent oil and gas industry, China Petroleum & Chemical Cor (SNP) stands out with regard to market share among companies for which sales data are available.  The company ranked 65th for the week and 12th for the month.  It had the highest increase in market share over the year, going from 54%% to 59.6% of the independent oil and gas market.  Sales increased 30.1% over that period and its profits grew by 21.4%.

 

     The 7 stocks selected are listed in Table 5B. 

 

 

Table 5B

New Top-Down Portfolio

September 18, 2007

Company

1 wk

% Chg

1 mo

% Chg

Mkt. Share

Increase

Sales

Growth

Earnings

Growth

Lihir Gold Ltd. (LIHR)

9.6%

34.1%

2.3%

38.1%

64.7%

IAMGOLD Corp. (IAG)

1.6%

52.4%

1.3%

133.7%

288.9%

Pan American Silver Corp. (PAAS)

0%

20.4%

5.4%

108.7%

268.9%

Freeport-McMoRan Copper & Gold (FCX)

12.3%

29.2%

29.6%

38.6%

41.3%

BHP Billiton Ltd. (BHP)

5.0%

22.3%

7.1%

20.3%

55.0%

Petroleo Brasileiro (PBR)

6.5%

31.4%

1.2%

28.4%

24%

China Petroleum & Chemical Cor (SNP)

1.3%

16.9%

5.6%

30.1%

31.4%

 

 

 

     The stocks in Table 5B will be tracked for price performance and how well they maintain their market share, sales growth and earnings growth.  A 25% sell stop is suggested.  As time goes by, a more balanced diversified portfolio will evolve to include various classes of bonds (ETF’s) and about 5% real estate.  

 

 

 

 

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