When utilities, food and tobacco are among the top sectors,
something's not right.
If you need additional evidence, look at the laggards. The
bottom third of IBD's 33 sectors include leisure, retail and
Bulls would prefer to see those lineups reversed. Since about
70% of the U.S. economy is linked to consumer spending, strong
retail and leisure sectors are helpful. And autos are big-ticket
items that ripple through an economy.
Yes, the market is in an uptrend, but it's as if the uptrend
is fielding a team of defensive, slow-moving substitutes.
Polaris Industries (
) is a wide-open offensive player. The maker of all-terrain
vehicles, motorcycles and snowmobiles is about fun. So far, this
market uptrend is about as much fun as paying your electric bill.
So, any discussion of Polaris has to begin with the
The market is not favoring the leisure sector right now.
Polaris' Relative Strength line -- which compares its
performance to the S&P 500 -- has been in a choppy decline
The Accumulation-Distribution Rating is a neutral C in Stock
Checkup at Investors.com, which suggests that big money is
neither rushing for the exits nor busting down the doors to get
Yet, earnings are strong. EPS growth stepped up from 15% to
27% to 44% in recent quarters. Revenue was a steady 26%, 25% and
24% in the same period.
After-tax margin was 8.2%, 8.9% and 9.2% in those three
quarters. These margins are near at least four-year highs.
Return on equity, a measure of financial efficiency, was a
dazzling 52% last year, which actually is down for the third
straight year. However, the company slashed its debt-to-equity
ratio from 98% to 21% in 2009-11.
Debt can artificially boost ROE. So, a somewhat lower ROE
accompanying a significant reduction in debt is probably a good
The dividend yield is 2%.
Where does this leave investors?
For IBD investors who reap their income from capital
appreciation, it would be more encouraging if Polaris' industry
group and sector would improve.