Find Good Values Away From The Crowd

5/26/2014


During deer season, hunters flock to areas known for their large herds. A lot of people chasing a lot of bucks can drive the prey to run faster or hide better, leading to fewer good shots.

But there's also another kind of hunter, the one who visits a remote location because he won't run into a lot of competition. The thinking is that even if there aren't as many deer in those distant woods, the hunter will get a clear shot at whatever he can find.

Both kinds of hunters can bring back trophies. But what if the lone stalker knows the back-woods region he's chosen teems with big-antlered bucks? That kind of intelligence changes the odds.

Think of our Quadrix stock-rating system as a tool to tell you where the best deer roam. Standard & Poor's breaks down the market into 24 group. Returns vary widely, with real estate setting the pace at 11% while the average retail stock is down nearly 8%.

Not surprisingly, stocks in the top-performing groups tend to be more expensive. Remember those fast-moving deer I mentioned? By the time a group becomes an investor favorite, finding attractive values can be tough. In contrast, the 10 poorest-performing groups look cheaper. Today, the laggards also look fundamentally stronger.

The 10 best-performing groups average Value scores of 51 and Overall scores of 55. In contrast, the 10 groups with the poorest returns average Value scores of 63 and Overall scores of 65.

In some of these areas — such as the bank, diversified-financial, retailing, and media groups — we see plenty of robust targets.

The table at below lists 15 recommended stocks in groups many investors have fled. If you'd rather do your own hunting, check out our Group Studies report at www.DowTheory.com/Go/Group, where you'll find Quadrix scores and other statistics on stocks in more than 100 industry groups.

STRONG STOCKS IN WEAK GROUPS
YTD
Total
Return
(%)
---- Quadrix Scores ----
Company (Price; Ticker)
Value
Overall
Industry Group
Aflac ($62; AFL)
(7)
96
84
Insurance
Ameriprise Fin'l ($108; AMP)
(5)
76
96
Divers. financials
Capital One Fin'l ($75; COF)
(1)
80
89
Divers. financials
Cognizant Tech. ($47; CTSH)
(6)
65
94
Software 
Comcast ($51; CMCSa)
(2)
71
83
Media
Foot Locker ($48; FL)
17
72
97
Retailing
Google ($530; GOOGL)
(4)
52
80
Software 
J.P. Morgan ($54; JPM)
(7)
94
59
Banks
Lear ($84; LEA)
4
87
95
Auto components
Macy's ($57; M)
6
89
94
Retailing
Magna Int'l ($99; MGA)
22
82
99
Auto components
ManpowerGroup ($79; MAN)
(8)
74
96
Profession. svcs.
Raymond James ($48; RJF)
(7)
87
72
Divers. financials
U.S. Bancorp ($41; USB)
2
72
60
Banks
Wells Fargo ($49; WFC)
9
81
92
Banks
Note: Quadrix scores are percentile ranks, with 100 the best.

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