Seeking Value Among High-Flyers

12/23/2013



Analysts who follow technical trends know that stocks going up tend to continue going up. Unfortunately, investors who try to tap into stocks with share-price momentum find the strategy often conflicts with another well-known trend: Stocks with low valuation ratios tend to outperform.

VALUE/MOMENTUM PLAYS
---------- Quadrix Scores ----------
Company (Price; Ticker)
Value
Perfor-
mance
Overall
Consumer Discretionary
Comcast ($49; CMCSa)
68
70
93
Lear ($83; LEA)
82
89
99
Macy's ($52; M)
85
66
94
Health Care
Cigna ($84; CI)
72
70
85
Industrials
Utd. Rentals ($74; URI)
74
89
93

The intersection between attractive valuations and strong price action doesn't see heavy traffic. But the table below suggests that at least a few stocks pass by. Two S&P 1500 Index sectors with stocks posting high average year-to-date returns — consumer discretionary and industrials — average Quadrix Value scores at least as high as the index average.

Health care, paced by drug, biotech, and health-technology stocks, still looks fairly pricey, with an average Value score of 47. Stocks in the sector average Overall scores of 58, slightly below the S&P 1500 Index average. On the other hand, consumer-discretionary and industrial stocks average Overall scores above 60, reflecting broad-based fundamental strength.

SECTORS WITH PRICE MOMENTUM
On average, health-care, consumer-discretionary, and industrial stocks have delivered the strongest returns so far this year. Neither consumer-discretionary nor industrial stocks look particularly expensive despite the run-up.
YTD
Total
Return
(%)
----------------- Average Quadrix Scores -----------------
Sector (No. Of Cos.)
Momen-
tum
Value
Quality
Perfor-
mance
Overall
Health Care (155)
44
53
47
67
59
58
Cons. Discretionary (245)
42
55
55
70
57
64
Industrials (213)
40
54
57
64
59
62
Technology (258)
36
48
51
62
54
55
Consumer Staples (76)
34
51
52
70
50
58
Financials (284)
32
58
56
51
54
59
Materials (100)
24
47
55
58
51
52
Energy (92)
24
55
67
54
45
60
Telecom Services (15)
18
39
65
40
39
48
Utilities (62)
17
54
73
40
35
59
Avg. S&P 1500
stock (1,500)
35
53
55
61
54
59
Note: Quadrix scores are precentile ranks, with 100 the best.

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