Top and Bottom Industries

Posted on Posted in General Thoughts

I use Value Line on a daily basis. It’s a great resource for viewing the long term history of a stock’s balance sheet and income statement data. Many stocks have 15 years of financial data, which is easy to look at on one page. I flip through the pages daily to look for investment ideas.

Each week, Value Line also prints a list of screens that are very useful to review. On page 24 of each weekly issue, they rank the 98 industry groups they track from top to bottom. They use a proprietary method called timeliness, which basically ranks recent stock price performance.

I like to flip the list upside down, and look at the bottom industries for ideas. Mean reversion is one of the most powerful forces in markets, and many of the industries that have performed poorly recently, will be the best performers of tomorrow.

I don’t typically use top down methods, macro analysis, or industry analysis to make investment decisions. But occasionally, looking in places where stocks have performed poorly recently will yield interesting opportunities to find above average companies that have been unjustly punished.

Here are the top 10 industries according to Value Line:

  1. Homebuilding
  2. Building Materials
  3. Securities Brokerage
  4. Home Furnishings
  5. Property Management
  6. Public/Private Equity
  7. Life Insurance
  8. Human Resources
  9. Pharmacy Services
  10. Bank

Here are the bottom 10 industries (worst is #1):

  1. Coal
  2. Educational Services
  3. Precious Metals
  4. Retail (Softlines)
  5. Maritime
  6. Tobacco
  7. Semiconductor Equipment
  8. Retail Store
  9. Biotechnology
  10. Metals & Mining

I’m spending some time looking at stocks in the retail, mining, and for profit education areas currently. There are a lot of problems in all of those areas, but there are also companies with clean balance sheets with the ability to weather the storms. I’ll discuss more ideas regarding specific stocks in some of these areas soon.

2 thoughts on “Top and Bottom Industries

  1. for profit education has been rebounding lately, good call! COCO seems especially undervalued, even though it shot up ~30% in 5 days

    1. Thanks Jack. Yes for profit is very undervalued in my opinion. Even after the industry wide bounce this week.

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