It's been another big month for the stock market. This stock
market's positive feedback loops were on full display in Consumer
and Finance stocks.
Stock Prices Slightly Above Fair Value
At 15.4 times this year's conservative earning estimate, stocks
look fairly valued.
Consider the average stock market P/E is 15. Apply that to $113
per share optimists expect for the S&P 500 in 2013. That
computes to fair value at 1695! If you say those earnings
projections are high (we would agree), trim to a conservative
$105 per share. That gives S&P 500 fair value of 1575.
Q1 Earnings Reports Shrugged Off
Now, markets looks forward at inflated second half earnings
On Tuesday, April 30th, 316 S&P 500 companies had reported Q1
results. Total earnings for these 316 companies were up +2.6%,
with 67% of companies beating earnings expectations. Revenues are
down -2.1%, with only 36% of companies coming ahead of top-line
expectations. The median surprise is a respectable +3.2% for
earnings and a negative -0.4% for revenues.
For Q4-12, S&P 500 companies reported earnings and revenues
up +2.2% and +1.5% y/y, respectively.
Using the Sector-Industry-Company Telescope
Here we list salient May macro themes and some investing tips…
(A) The rise in Q1 U.S. jobs numbers and upward 2013 jobs
revisions helped the stock market hit fresh multi-year
highs. In a positive feedback loop, the personal and home
sides of Consumer Discretionary are highest ranked:
Apparel, Media, & Home Furnishing-Appliance ranked at the top
of the pack.
Retail in the Consumer Sectors is now at Market Perform: Both
Food and non-Food Retail/Wholesale are here.
At below market were Autos-Tires-Trucks, and Tobacco. The
Consumer industries that showed us the weakest Zacks Ranks had
business model issues: Food, Publishing, and Consumer
(B) High Zacks Ranked industries from building U.S. momentum in
the Finance Sector focused on the stock market. Investment funds,
Investment Banking & Brokering, Real Estate, and Insurance
industries showed up even stronger in early May versus early
(C) In marked contrast to Materials and Energy, there is noted
building of strength inside the Industrials sector on a stronger
domestic outlook. Construction-Building Services,
Transportation, and Metal Fabricating industries are very
Machinery, Business Products, and Pollution Control struggle the
(D) IT looks strong, but with diverging drivers.
Semiconductors and Misc-Tech became the most attractive
industries here, with growth in smart phone Asia-Pacific.
Computer Software & Services ranked as a market weight
industry. Telco Hardware, Computer Office, and Electronics
fell back to become underweight Zacks Ranked IT Industries.
(E) The Utilities Sector, interestingly, got a further upgrade
into early May.
Endesa - Chile
(F) Marked weakness in the international outlook pushed down the
Materials sector. Weakness was apparent in very low Zacks
Industry Ranks for Steel and Metals-Non-ferrous. Chemicals
and Paper were weaker too.
(G) Weaker gasoline at the pump prices played out within the
Energy Sector. We saw Oil E&P, Drilling and Oil-Misc.
with its Refiners do best in the Zacks Ranks. They were market
weight. There was a Zacks Rank drop in Integrated Oil
Companies and Pipelines to market underweights.
Alternative Energy and Coal industries remain victims of low
natural gas prices.
To read the entire piece on May's Market Strategy,
ALLIANCEBERNSTN (AB): Free Stock Analysis
BRUNSWICK CORP (BC): Free Stock Analysis
ENDESA-CHILE (EOC): Free Stock Analysis
GREENBRIER COS (GBX): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis
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