The Global Industry Classification Standard lists 10 sectors, 24 industry groups, 68 industries, and 154 sub-industries in the stock market. Checking on which of these sectors' components have recently posted the most 52-week highs could help you zero in on promising investments.
To be fair, there are probably wonderful bargains in each sector, and those with the least new-high-setters might hold many undervalued jewels. However, it could take a while for those sectors to come back into favor. Instead, let's look at the three sectors in which at least 25% of the components have set new highs, according to Bespoke Investment Group:
|
Sector |
S&P 500 Companies in Sector |
Number Hitting 52-Week Highs |
Percentage of Companies |
|---|---|---|---|
| Materials | 31 | 9 | 29% |
| Consumer Staples | 41 | 11 | 27% |
| Industrials | 57 | 15 | 26% |
Source: Bespoke Investment Group.
The big pictures
It's no surprise that materials and industrials are advancing. As the global economy slowly heats up, these sectors -- central to manufacturing and infrastructure -- will inevitably enjoy growth. Consumer-staples stocks are also showing signs of life domestically.
Perhaps more importantly, they'll continue to benefit from growth in emerging markets. Procter & Gamble (NYSE: PG) just reported overall unit volume up 8%, and organic revenue up 4%, with emerging-markets volume up double-digit percentages.
While these sectors seem to be on the move, note that most of their components have yet to hit new highs. A peek inside each reveals several companies poised to perform for investors. Each of the three companies below sports a P/E of 20 or below (suggesting it's not wildly overvalued) and a return on equity of at least 15%:
- In the materials arena, Taseko Mines (AMEX: TGB) stands to benefit from not just from its gold exposure, but also from rising copper prices. Yet it trades for just more than 10 times trailing earnings, well below its peer group average, and about half its own five-year average.
- Among industrials, Switzerland-based ABB (NYSE: ABB) offers a way to benefit not only from rising energy demands, but also from our gradual shift toward alternative energies. The company helps transmit energy between regions and boosts the efficiency of energy companies with its automation services.
- For a promising consumer-staples company, look to Philip Morris International (NYSE: PM), which rewards shareholders with a growing 4.4% dividend yield even before you factor in share price appreciation. As the globe's emerging markets boost people's incomes, their ability to buy tobacco will grow.
Companies that can make you rich wait in all corners of the market. Seeking sectors that look particularly attractive can help narrow down your search -- and give your portfolio a much-needed shot of diversity.
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