How to Find a Successful Investment Opportunity by Tracking an Industry Trend - Real Time Insight

By John Blank,

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Inside an economy's churn, broad opportunities and equally broad risks exist for any investor.

My colleagues have positioned their investors on bullish opportunities. Picks from individual strategists in Homebuilders (XHB), Financials (PNC), Energy (ERX), and Utilities-Water (AWK) are just a few.

But be equally aware, churn includes significant downside risks. 

Here are five industry trends to think about…

(1) Momentum in U.S. housing markets helps the Financials sector and Home Construction industries the most. 

For Zacks Rank industries, we see strong earnings ranks tied to Housing such as Home Furnishing-Appliance , Real Estate, Construction-Building Services, Banks-Major and Banks &Thrifts.

(2) Rising oil prices mostly help the Energy sector.

For Zacks Rank industries, we see strength in Oil-Misc., Pipelines, and Drilling.  Also, we see a strong Zacks Rank for Energy-Alternative Sources.

We see Zacks Rank weakness in Airlines, Oil & Gas-Integrated and Coal.

(3) Fiscal Cliff.  Coming tax sunsets could raise U.S. personal income tax rates, or impose sequestration that cuts spending.  This appears to hurt the Industrials and IT sectors the most.

We have seen weakness in capital goods spending and hiring across all business sectors.  For a Zacks Rank example, a weak Misc.Tech industry is now apparent.

(4) The U.S. drought has negative effects on the upstream Consumer Staples sector in such industries as Food Distributors and Packaged Foods , who must pass on the higher input prices.

We see strength in Zacks Rank downstream industries like Utilities-Water, Ag. Products, Fertilizers, and Ag. Chemicals .

(5) China slowdown shows up in weakness in Steel and Metals-non-Ferrous.

Some questions most investors would like to ask? 

Aside from a strong Zacks Rank, what makes one industry trend MORE interesting to an investor than another industry trend?  What did you use as timing criteria to ENTER into an investment position that chases a current industry trend?  What you do plan to use to time your EXIT from riding this industry trend?


AMER WATER WORK (AWK): Free Stock Analysis Report
DIR-EGY BULL 3X (ERX): ETF Research Reports
PNC FINL SVC CP (PNC): Free Stock Analysis Report
SPDR-SP HOMEBLD (XHB): ETF Research Reports
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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: AWK , ERX , PNC , XHB

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