Trendrating Monthly Research Brief – August 2020
US Large Caps Show Wide Performance Dispersion in July
There was a wide gap of price performance for US Large Caps last month, with big name technology stocks boosted by better than expected earnings, and major health care providers leading the way.
The top fifty performing Large Caps had an average return of approximately 20% in July while the bottom fifty, averaged -9.25%. The eighty percent that makes up the rest of the S&P 500 went up a bit over 3% for the month.
Performance dispersion exists and offers outperformance opportunities to be captured by smart investors. Trendrating provides a unique rating model and additional advanced analytics designed to capture trends, identifying most of the strongest and weakest constituents in any equities universe within a yearly horizon.
Any investment strategy can be enhanced by a better synchronization to trend development. Most investors use numerous metrics based on fundamental and quantitative data, but very few measure in a proven, objective and systematic way, the real direction of price trends and remain hostage to market noise and opinions, despite the fact that capturing trends is the key to better returns.
- Rocco Pellegrinelli, CEO of Trendrating
August Sector Allocations
To arrive at our monthly Sector Allocations, we delineate the S&P 500 universe of stocks into five groups based on their Smart Momentum Score (SMS). Any stock that has retraced at least 20% from a trend high is considered an outlier. The sector allocation is then found by looking at the proportion of names within quantile one for each sector. To control risk, no sector can represent more than double its weighting in the index.
Over the last few months, the S&P 500 has continued its slow and steady climb. The Trendrating model remains heavily overweight Health Care and has a slight overweighting on Industrials and Materials. Conversely, Trendrating identifies the sectors with the weakest trends as Communication Services, Utilities, Consumer Staples, and Energy. We are neutral on the other four sectors, which all have a deviation of less than +/- 2% from the index weighting.
Top Trending Stocks in the S&P 500
Each month we distribute the Trendrating 100 list to our clients. We delineate the S&P 500 universe of stocks into five groups based on their Smart Momentum Score (SMS) and retracement value. Any stock that has retraced over 10% from a trend high is considered an outlier. This leaves us with a list of names in which our Model has high conviction. The market environment will dictate the number of names in the Top 100 list, but it will typically range from 80-100 companies. Here will be highlighting the Top 25 companies each month. Contact Trendrating for the complete list.
Rating Grade: A = Strong Bull Trend / B = Emerging Bull Trend / C = Emerging Bear Trend / D = Strong Bear Trend
Smart Momentum Score (SMS): is a continuous rating scale between -3 and 3, measuring the strength of the trend since that trend began. The metric allows the model to differentiate between securities of the same ratings, whether that is an A, B, C or D rated security.
Retracement: The percentage off the peak of the trend for positive trends or off the bottom for negative trends.
Proven Effectiveness – A 20-year back test supporting Trendrating’s sector allocation approach
Trendrating Brochure – An overview of the services we offer
Pinnacle Trendrating Innovative Equity Fund (IPTRX) – A mutual fund utilizing our trend capture model
Contact us to request more information about Trendrating’s web-based platform
ANY AND ALL INFORMATION PROVIDED BY TRENDRATING OR DERIVED FROM TRENDRATING’S DATA IS PROVIDED “AS IS” AND TRENDRATING MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Trendrating has no affiliation with any company mentioned in this report.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.