Last month I looked for interesting sectors to invest in based on relative strength.
The “buy” candidates are the bombed out ones. I would like to ammend my selection criteria slightly by seeking those sectors with very low RS5y (relative strength over 5 years), but positive RS1y (relative strength over 1 year).
The big underperforming sectors over 5 years are tech, mining, electricity, industrial metals, and anything oil-related. Technology, and the oil sector are still down over one year, suggesting it is still not time to buy. Mining, electricity and industrial metals are the interesting sectors.
Contrariwise, when seeking sectors to sell, look for ones that have high relative strength over 5 years, but are underperforming over 1 year. The stand-out sector is housebuilding. Housebuilders are up 142% relative to the market, but they have been flagging decidedly over the last year. Investors seem to be taking money off the table.
Here is the full table, which has AIM companies excluded:
RS5y RS1y Sector 179.06 -2.49 FORESTRY AND PAPER 141.97 -21.48 HOUSEHOLD GOODS AND HOME CONSTRUCTION 74.29 8.35 HEALTH CARE EQUIPMENT AND SERVICES 68.48 4.88 GENERAL INDUSTRIALS 68.20 -0.03 PHARMACEUTICALS AND BIOTECHNOLOGY 59.79 -14.32 FOOD PRODUCERS 59.28 4.66 CHEMICALS 55.60 -12.06 FINANCIAL SERVICES 54.45 11.14 INDUSTRIAL TRANSPORTATION 48.15 -7.18 MEDIA 47.30 -12.27 LEISURE GOODS 45.06 -9.63 CONSTRUCTION AND MATERIALS 38.59 -13.97 TRAVEL AND LEISURE 34.03 0.93 AUTOMOBILES AND PARTS 33.95 -9.34 SUPPORT SERVICES 33.52 12.80 ELECTRONIC AND ELECTRICAL EQUIPMENT 30.70 6.53 TOBACCO 30.50 1.86 PERSONAL GOODS 29.35 -15.48 LIFE INSURANCE 29.25 -5.29 SOFTWARE AND COMPUTER SERVICES 28.08 -12.07 FIXED LINE TELECOMMUNICATIONS 21.79 -4.55 NONLIFE INSURANCE 21.37 -38.28 GENERAL RETAILERS 21.02 -7.57 GAS WATER AND MULTIUTILITIES 18.78 5.96 INDUSTRIAL ENGINEERING 16.33 -20.82 REAL ESTATE INVESTMENT TRUSTS 13.72 -14.18 BEVERAGES 8.02 -11.32 FOOD AND DRUG RETAILERS 3.98 -18.64 MOBILE TELECOMMUNICATIONS 3.86 7.63 EQUITY INVESTMENT INSTRUMENTS 0.54 -25.94 REAL ESTATE INVESTMENT AND SERVICES -8.95 -4.96 AEROSPACE AND DEFENCE -13.46 -20.09 BANKS -34.92 -7.22 TECHNOLOGY HARDWARE AND EQUIPMENT -53.58 55.68 MINING -53.78 9.25 ELECTRICITY -57.41 -15.56 OIL EQUIPMENT SERVICES AND DISTRIBUTION -72.65 184.81 INDUSTRIAL METALS AND MINING -72.99 -7.97 OIL AND GAS PRODUCERS
