So far in 2014, the Transportation sector has been the best
performer in the S&P 500, rising +11.7% year-to-date. It's easy
to see why: a whopping 82% of companies within the sector have
delivered positive earnings surprises this earnings season,
compared with 66% for the overall S&P 500. Even more
remarkably, 82% of Transportation companies have beaten on the top
line too, crushing the S&P 500 average of 61%.
The Medical sector has been hot too, rising +11.3% so far in
2014. A full 78% of companies within the sector have beaten
earnings estimates this earnings season.
Meanwhile, Conglomerates have been trailing the pack this year
with the sector down -3.5% year-to-date. Just 43% of companies
within the sector have beaten earnings expectations this earnings
You can see the data from the rest of the sectors below (note
that Zacks slices the S&P 500 into 16 sectors instead of
So which sectors do you think will outperform or
underperform throughout the rest of 2014?
My sector bet to outperform is Transportation. The reasons: (1)
companies are beating expectations on both the top and bottom
lines, (2) earnings growth is solid, (3)
could continue falling, and (4) the price momentum is strong.
My sector bet to underperform is Finance. The reasons: (1)
earnings growth is flat, (2) the yield curve could continue to
flatten, pressuring banks' net interest margins, (3) refinancing
activity is dead and will likely not come back for a long, long
time, and (4) banks have been boosting their bottom lines by taking
lower provisions for loan losses despite strong growth in subprime
auto loans, which have historically high default rates.
Please share your picks below!
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