Find Top Performing Stocks -Top Down Approach

The market has been challenging for a good part of 2015 – but despite a challenging market, there are always opportunities if you have the right tools.

I was interested to reflect back on 2015 so far.  I wanted to  see what some of the top performing sectors and industries have been for this year to date – so I opening up “Sector Viewer” under the “Viewers” tab today.

I was presented with the following:

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I saw that currently (as of 11 September) – Consumer staples is the top ranked Sector – this is derived by sorting the list by RT (Relative Timing) -to bring the quickest moving (by price) sectors to the top of the list.

Double left clicking on “Consumer staples” then drills me down into the Industries that make up “Consumer Staples.” I then noted the top 3 industries in the “Consumer Staples” sector. These industries are sorted by RT once again – to find the fastest moving (by price) industries.  This can be seen per the image below:

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The top rated industry per the image above being “Consumer staples (Food, Bev&Tob).” So from initially screening by sector, I was able to drill down into the best industries presently.

Once again, I double left clicked on the “Consumer staples (Food, Bev&Tob)” industry to see what stocks made up this industry

The top 5 stocks of this industry on 11 September were as follows:

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I decided to put these 5 stocks into a watchlist by selecting the top 5 stock and adding them to a watchlist. I wanted to look at the graph since January this year to present – to see how it stacked up compared to the overall market. The total graph is was as follows:

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What a great looking graph – one could certainly lose sight that the overall market for Australia in 2015 has been a very different picture. So what is driving this portfolio?   We can see per the blue graph – EPS. This is the VectorVest earning per share – it is a 12 month leading forecast on earnings. We often refer to this as the engine of stock price appreciation potential. Rising earnings will typically lead to higher prices.

So would I rush out and buy this portfolio right now? The simple answer is no.   The reason being, is that I want to apply market timing before looking at any stocks. VectorVest is still noting that we are in a confirmed down call. If this market continues to fall further – even a smooth rising portfolio as per the one above is likely to experience some pull back.

Next time we get the signals to go back into the market – you may want to consider a top down approach – where you identify the top sectors and then the top industries within the sectors – and finally the best stocks within the industries.

Regards,

Russell.