Saturday, February 18, 2012

A Macro View: Stock Picking based on PPI Index

The recent release of the PPI index and core PPI has sparked some interest in how it is related to stock market returns. Calafia Beach Pundit thinks that the
PPI inflation Of 3.5% points to higher yields ahead.

From my regression research, the PPI index has the highest correlation with stock market returns by sector versus the CPI indexes of core and headline. Results for back-testing over the last 10 years also resulted in greater returns for the PPI over the CPI although core CPI does better than the headline CPI. But for the PPI versus core PPI, the results for the core PPI are very weak and much lower than the S&P 1500 flat weighted. Even when adding core to the headline PPI results in lower returns than just PPI.

The above regression analysis was in regards to sectors and stocks that performed well when the index was going up, that is, inflation heating up on the consumer side or the producer side also called "Lovers". This week's stock picking is based on a regression back test from July 2000 until the latest release in February for January's numbers. It performed better than the S&P 1500 flat weighted and achieved nearly 10% annualized return over the back test period. The following stock picking list is the "Lovers" list and filtered by Sabrient's Strong Buys and Buys.

Assurant, Inc.,AIZ, STRONGBUY
Peabody Energy Corporation,BTU, STRONGBUY
Nabors Industries Ltd.,NBR, STRONGBUY
Baker Hughes Incorporated,BHI, BUY
BB&T Corporation,BBT, BUY
ConocoPhillips,COP, BUY
CSX Corporation,CSX, BUY
Halliburton Company,HAL, BUY
Helmerich & Payne,HP, BUY
International Paper Company,IP, BUY
PerkinElmer,PKI, BUY
Pioneer Natural Resources Company ,PXD, BUY
SunTrust Banks,STI, BUY
Zimmer Holdings,ZMH,BUY

CARPE DIEM: U.S. Manufacturing Is Open for Business and Doing Well; Despite, Not Because of, Government Policy

CARPE DIEM: Chart of the Day: Drill, Drill, Drill = Jobs, Jobs, Jobs

Symbol Rating Price * Market Cap SABRIENT SCORES
Value Growth Momentum
AIZ STRONGBUY 43.97 Mid-Cap 88 33 63
BTU STRONGBUY 35.96 Large-Cap 97 65 15
NBR STRONGBUY 19.16 Large-Cap 98 86 41
BHI BUY 47.9 Large-Cap 98 83 32
BBT BUY 29.65 Large-Cap 62 59 97
COP BUY 72.81 Large-Cap 74 49 24
CSX BUY 21.94 Large-Cap 92 78 43
HAL BUY 36.14 Large-Cap 98 90 32
HP BUY 59.31 Large-Cap 78 95 53
IP BUY 33.02 Large-Cap 70 38 93
PKI BUY 26.07 Mid-Cap 44 94 78
PXD BUY 111.85 Large-Cap 18 87 71
STI BUY 22.28 Large-Cap 96 33 87
ZMH BUY 61.25 Large-Cap 54 72 70

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Blogger rahul said...

Thanks for great information you write it very clean. I am very lucky to get this tips from you

how to claim ppi

3:38 AM, March 09, 2012  

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