Consumer Discretionary Stocks Take the Lead
If you were waiting for a sector or group to emerge as the leader out of the market’s ashes, take a look at consumer discretionary stocks. They were up 16.7% last week….the best overall sector. Casinos, homebuilders, and apparel retailers were noteworthy leaders. That’s hardly a defensive posture from an investor’s point of view. No, we think the new-found strength here is a general indication that the rebound effort isn’t hollow; it’s the real thing.
With that being said, anybody buying into the group should understand that a big chunk of the reason this sector and its industries did so well was because they did so poorly over the last two months. This is just little extra ‘correction’ for the names that were sold a little harshly in the big pullback. Still, undervalued is undervalued - we like the opportunities here.
Here’s how the sectors stacked up…
| Sector | 1-Week Pct Chg | 2-Week Pct Chg | 3-Week Pct Chg | %Chg: 4 wk |
| S&P 1500 Consumer Discretionary Index | 16.71% | 4.75% | 5.26% | -13.02% |
| DJ Basic Materials | 14.87% | 1.04% | 3.32% | -15.83% |
| S&P 500 Energy Sector | 13.01% | 10.43% | 18.46% | -11.19% |
| Dow Jones Transportation Average | 12.68% | 5.23% | 3.77% | -6.02% |
| S&P 500 Industrials Sector | 12.42% | 3.60% | 2.04% | -9.69% |
| S&P 1500 Financial Sector | 12.34% | 0.23% | 5.10% | -17.32% |
| Dow Jones U.S. Telecomm TR Index | 11.81% | 4.79% | 12.92% | -8.91% |
| DJ Technology | 10.10% | 0.01% | 4.28% | -10.76% |
| S&P 500 Consumer Staples Sector | 8.33% | 2.74% | 6.50% | -10.48% |
| Dow Jones Utility Average | 6.99% | 6.72% | 16.59% | -8.09% |
| DJ U.S. Health Care Index | 5.63% | 1.11% | 9.59% | -10.37% |
And here are some of the top performing industries from last week, many of them from the consumer discretionary sector (which can overlap a great deal with the services sector)
| Industry | 1-Week Pct Chg | 2-Week Pct Chg | 3-Week Pct Chg | %Chg: 4 wk |
| DJ U.S. Gambling Index | 47.19% | 8.80% | 4.76% | -14.86% |
| DJ U.S. Specialty Finance Index | 24.08% | -0.51% | 2.70% | -20.02% |
| DJ Home Construction | 23.59% | 6.03% | -1.82% | -17.69% |
| DJ U.S. Nonferrous Metals Index | 22.86% | -3.48% | -9.64% | -27.30% |
| DJ U.S. Water Index | 22.70% | 9.22% | 21.79% | 3.03% |
| DJ Heavy Construction | 21.28% | -2.13% | 2.57% | -13.52% |
| DJ U.S. Specialty Retailers Index | 20.78% | 6.29% | 5.28% | -11.07% |
| DJ U.S. Clothing & Accessories Index | 20.23% | 4.49% | -4.06% | -17.32% |
| DJ Coal | 20.06% | -1.93% | 8.47% | -12.24% |
| DJ U.S. Exploration & Production Index | 19.33% | 14.21% | 31.00% | -8.33% |
| DJ U.S. Real Estate Index | 19.10% | -1.80% | -13.80% | -21.12% |
| DJ U.S. Hotels Index | 18.91% | 7.59% | 6.79% | -12.65% |
| DJ U.S. Commercial Vehicles & Trks Index | 18.89% | -4.06% | -7.20% | -18.17% |
| DJ Airlines | 18.17% | 6.15% | 32.66% | 11.88% |
| DJ U.S. Apparel Retailers Index | 17.60% | 2.94% | 0.17% | -17.42% |
| DJ Pipelines | 17.46% | 18.64% | 30.43% | -12.82% |
| DJ U.S. Marine Transportation Index | 17.42% | -0.41% | 2.95% | -15.97% |
| DJ Trucking | 16.94% | 13.89% | 10.81% | 4.82% |
Like we said, casinos, retail, and construction all caught our eye. We like casinos becuase they’ve ben trashed lately…a little too much. We like retail because those stocks held up much better than most other stocks did during the bulk of the recent pain. Check out this chart to see the relative results of all the major service/discretionary groups.
The one group you won’t see on the chart is contruction (heavy and homebuilding). The values are certainly there, but both are a question mark in our book. Department stores and casinos still have a shot at doing well even if things turn for the worst. Construction companies don’t have the luxury of being recession proof. Still, a speculator may do very well with them.
If we had to pick, this is the way we’d go…
Casino: Las Vegas Sands (LVS)
Retail: Abercrombie & Fitch (ANF)
Construction: CRH PLC (CRH)
There’s still a lot of dead weight and volatility to work through, but we do believe the bear market is over….even though we think the recession has just begun. (The two aren’t synchronized, so don’t be fearful now - the time to be fearful was a year ago.) Though the new leaders are still in question, we think the discretionary sector is a good place to find some portfolio-rebuilders. More to come.
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