What Are the Strongest and Weakest Names in Each Sector?

Minyanville

Today my firm is reviewing the five strongest and weakest stocks in the technology, financial, health care, industrials, materials, consumer services, consumer goods, and energy sectors. For those who are not familiar with our Buy/Sell ratings, we use a quantitative price methodology for ranking the strength of each stock. There are several ways to take advantage of this information for profitable investing. We like deploying a pair trading strategy. You can either do a dollar neutral or beta neutral weighting, depending on your objective, to neutralize risk. One reason we like this strategy is that we would rather not deploy capital on a directional trade when the S&P 500 (^INX).

For example, this is how you would have done year-to-date if you were to get long the top five names and short the weakest names in each sector:

  • Financials: +16.88%
  • Technology: +16.36%
  • Health care: +14.73%
  • Energy: +27.25%
  • Industrials: 14.46%
  • Consumer goods: 12.77%
  • Consumer services: 20.24%
  • Materials: 18.52%
Over the same period, the S&P 500 was up 6.03%. Remember, you are not taking on the same risk when you neutralize beta.

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