Seeking Strong Sectors

3/16/2015


The next time you read in these pages that we advise purchasing a stock solely because of its strong price action will be the first time.

We consider near-term price action just one of many factors in the stock-selection process, which starts with our Quadrix stock-rating system assigning percentile ranks to roughly 5,000 stocks. That said, we do appreciate a nice stock chart, so this week we're looking for both strong recent performance and solid fundamentals — as measured by Quadrix Overall scores.

Health-care stocks average the highest year-to-date (7.2%) and 12-month (23.6%) returns among the 10 sectors. They also average Quadrix Overall scores of 55, below the average for all S&P 1500 Index stocks. In the health-care sector, we recommend two companies that have outperformed the sector average so far this year and over the last 12 months; both earn Overall scores of at least 85. Both are on our Focus List.

• Aetna ($100; AET).
• Shire ($238; SHPG).

Technology stocks rank second in year-to-date returns (averaging 1.5%), with above-average 12-month performance (10.3%). Using the same criteria as health care — returns above the sector average and at least 85 Overall — four tech stocks make the cut:

• Apple ($122; AAPL).
• CDW ($36; CDW).
• Nvidia ($23; NVDA).
• Skyworks Solutions ($92; SWKS).

One other sector — consumer discretionary — averages year-to-date and 12-month returns above the index average. The sector also averages an Overall score of 64, tops among the sectors. Two stocks in the sector — Lear ($106; LEA) and Foot Locker ($61; FL) — satisfy our screening criteria.


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