Sunday, March 18, 2012

ISM Non-manufacturing stock picks...

My last post presented 22 Stocks That Perform Well When The ISM Index Goes Up along with some analysis of the ISM reports published in March. The picks were based on the manufacturing index along with 5 of the subindexes (employment, new export orders, new orders, and price). The following list of stocks are based on the most recent ISM report on the non-manufacturing sectors of the economy and the same subindexes. Since the composite/headline index was only added in early 2008, the subindexes were useful in allowing a backtest since early 2000.

As expected the stock picks this time should overlap with the last report as both the non-manufacturing and especially the manufacturing indexes are highly correlated with the overall growth of the economy. Even the backtested annualized returns were the same and above the S&P 1500 flat weighted. At this time, it might also be interesting to see the sector breakdown of the last regression. The sector limit was raised to 30 and some sectors still reached that limit.
Consumer Discretionary 30
Consumer Staples 21
Energy 22
Financials 30
Health Care 16
Industrials 30
Information Technology 3
Materials 25
Telecommunication Services 1
Utilities 26
The table above was just for the last rebalance date but over time there are some observations to notice. The ones that are at 30 (Consumer Discretionary, Financials and Industrials) stayed at the limit the whole time. Those not reaching the limit stayed under the limit and the low ones stayed low. So overall consistent across sectors over the rebalance periods. The two sectors that had the most variance across rebalance dates were Energy and Health Care. While both suffered the most during the spring and summer of 2008, Health Care took it on the chin in the spring of 2000 during the dot-com bust. Below are the picks based on the regression analysis of the non-manufacturing ISM index:
American International Group, Inc. (AIG)
Goodyear Tire & Rubber Company (GT)
The Hartford Financial Services Group, Inc. (HIG)
Principal Financial Group, Inc. (PFG)
Discover Financial Services (DFS)
Prudential Financial, Inc. (PRU)
Wynn Resorts, Limited (WYNN)
MetLife, Inc. (MET)
SunTrust Banks, Inc. (STI)
Coventry Health Care, Inc. (CVH)
Regions Financial Corporation (RF)
Cliffs Natural Resources Inc. (CLF)
Tyson Foods, Inc. (TSN)
Cummins Inc. (CMI)
Mattel, Inc. (MAT)
Marathon Oil Corporation (MRO)
EOG Resources, Inc. (EOG)
Macy's, Inc. (M)
WellPoint, Inc. (WLP)
Devon Energy Corporation (DVN)
Newfield Exploration Company (NFX)

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

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