We’ve mentioned it here before, but it’s worth saying again: Nearly half of a stock’s price movement is tied to the performance of its respective group (sector and industry).
That being said, most great stocks from great groups often have some great peers as well.
If you find yourself in a killer trade (or wished you were in one), take a look at the characteristics of THAT STOCK and then hunt within its group to find OTHER STOCKS that share the same characteristics.
Does a certain outstanding stock exhibit great sales growth? I’m sure there are at least a few within its group that are also showing similar numbers.
What about increasing margins? If the stock is doing well, it’s likely that the industry itself is also experiencing meaningful increases in margins.
This type of screening is often called “modeling”. Figure out the components of what makes something successful, and concentrate on that.
If you’re in love with a certain stock or sector, but it’s not doing anything or (worse) moving against you, move on.
If you see great stocks in great groups while you’re bemoaning your misfortune in laggards or non-movers, find what stocks are successful and model them.
If the winningest stocks in a particular sector or industry are trading at P/E ratios that you generally won’t consider, consider this instead: If you had considered them, they would be winning for you.
So therefore, see what characteristics some of the best stocks have in common, and try getting on some of those.
Here’s something to start you off:
The top four Sectors based on the percentage of stocks at (or within 10 percent of) their 52-week highs are listed below.
Current standings:
1.Conglomerates 64%
2.Utilities 58%
3.Transportation 57%
4.Tie between:
Oils-Energy 47%
Autos-Tires-Trucks 48%
Here’s a few stocks from each of those current top sectors (for July 17, 2007):
PNR Pentair, Inc. - Conglomerates
TU TELUS Corp. - Utilities
TOPT TOP Tankers, Inc. - Transportation
SLB Schlumberger Ltd. - Oils-Energy
AXL American Axle & Mfg. Holdings, Inc. - Autos-Tires-Trucks
Now try screening for stocks in these sectors that are in the best industries.
In fact, in the Research Wizard, you can rank the industries on whatever item you choose. (same thing for the sectors.)
Want to find the “best” industries based on the Zacks Rank? You can. What about the highest ROE or biggest earnings estimate revision? No problem. Whatever items you want to use to rank your industries with, it can all be done with a few clicks of the mouse.
And then you can even narrow it down to the best stocks within those groups – again, based on whatever criteria you choose.
To search for the best stocks (and groups) yourself, sign up for your two-week free trial to the Research Wizard. Remember the key to successful screening is in discovering those screens that have produced profitable results in the past. And that’s exactly what you get with the powerful screening and back-testing ability of Research Wizard. You can do it. Learn how today: http://researchwiz.zacks.com
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.