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January's Surprising Leaders
With the month of January now officially over, we can take a look back at which sectors or industries started the year right. While this initial tone-setting doesn't always mean something, in this case, there are some pretty important underlying stories that provide a glimpse of what may be bigger underlying trends.
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Take a look at the top sectors and how they performed below. For perspective, the S&P 500 fell 2.7% in January. Some of these industries' performance may surprise you, but surprising or not, they're all worth exploring.
Photographic Products
You can pretty much chalk the success of the photographic products industry up to Eastman Kodak (NYSE: EK) - the biggest banana in the bunch. The long-troubled photographic supply company shocked the world last week when it earned $1.08 per share versus the anticipated 18 cents. And, with $2 billion in cash and finally-improving profit margins in Q4, the company will at least be able to stay afloat as it continues to revamp its business model.
While the bulk of the investment market (including some analysts) still suggests Eastman-Kodak is a failing relic, I like it not only as a contrarian play, but as a turnaround story. The new business model shows real promise of revenue in 2010 and beyond. (Learn how to be a contrarian investor, see Buy When There's Blood In The Streets).
Banks
Just for the sake of simplicity I'm going to combine all the different banking industry categories into one, and broadly say that bank stocks aren't radioactive anymore.
As for which banks helped lead the charge the most, there are too many to name - it would be easier to ask which banks didn't help with the effort. However, it was the smaller and regional names that carried the most weight. These banks are also looking like the best investments of the group right now.
Take SunTrust Banks (NYSE:STI) or KeyCorp (NYSE:KEY) as examples. Although neither are technically regional names, let's face it - neither are Citi (NYSE:C) or JP Morgan (NYSE:JPM). SunTrust managed to end the month about 20% higher despite a handful of downgrades. KeyCorp survived a downgrade as well, gaining nearly 30% for the month despite not having turned a profit in more than a year (with none in the foreseeable future).
I'll tow the line here and steer you toward the smaller names, and away from the bigger bank stocks this year. The numbers/results support that thesis. (Learn more about how to invest with a thesis in Invest With A Thesis.)
Automobiles
While I applaud any gain in January, to highlight Ford (NYSE: F) as one of the month's winners may be a little misleading. Ford is the American piece of the industry at this point as far as American automakers, but it was pure luck that allowed it to hit the end of the month with a gain - the stock took a couple of big hits after the early January surge, and ended the month on a sour note.
Yes, Ford swung to a profit for the first time in years, and plans on being profitable in 2010. Based on the newly-volatile chart though, now's probably not the time to go fishing.
On the flip side, when the dust finally settles, I see Ford (and only Ford for the time being) as being investment-worthy. Other than that, the other big auto industry names may already be at their max 2010 values.
Retail Stores
Retail stores may be the most unsung winners among January's leaders, yet also the most compelling. Though never explosive, the general merchandise store stocks have made up for it by being reliable and consistent. The fact that they have the weakest six-month results also offers another benefit: there's not as much overbought pressure that could potentially weigh them down.
As for the individual leader that drove these gains, you may be surprised to hear it wasn't Wal-Mart (NYSE:WMT) - it was Target (NYSE:TGT) with its 5.6% rally during January.
While Wal-Mart continues to be a Wall Street darling, having received the coveted "buy" rating from Goldman last Friday, shares of Target have actually managed to do something WMT shares haven't managed to do in the last 10 years: make net gains.
Although that factoid shouldn't matter now, there's still a reason for it (even if unknown). And, it's a reason that may be tough to overcome. That's why Target still gets my nod over Wal-Mart for 2010.
The Bottom Line
A few sectors have stormed into 2010 with some impressive (and surprising) results. Stay tuned in to the best stocks in these sectors as the year progresses: they could top the year-end best lists too.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Take a look at the top sectors and how they performed below. For perspective, the S&P 500 fell 2.7% in January. Some of these industries' performance may surprise you, but surprising or not, they're all worth exploring.
|
Name |
1-Mon Pct Chg |
3-Mon Pct Chg |
6-Mon Pct Chg |
|
Photographic Products |
43.37% |
61.22% |
103.66% |
|
Regional Banks Index |
11.37% |
19.21% |
23.46% |
|
Commercial Banks Industry |
8.90% |
10.89% |
20.66% |
|
Banks Industry Group |
8.13% |
10.85% |
19.56% |
|
Automobile Manufacturers |
8.06% |
52.85% |
35.28% |
|
Diversified Banks |
7.02% |
4.86% |
18.40% |
|
Gen Merchandise Stores |
5.65% |
6.74% |
13.91% |
|
Automobiles Industry |
5.46% |
40.81% |
29.66% |
Photographic Products
You can pretty much chalk the success of the photographic products industry up to Eastman Kodak (NYSE: EK) - the biggest banana in the bunch. The long-troubled photographic supply company shocked the world last week when it earned $1.08 per share versus the anticipated 18 cents. And, with $2 billion in cash and finally-improving profit margins in Q4, the company will at least be able to stay afloat as it continues to revamp its business model.
While the bulk of the investment market (including some analysts) still suggests Eastman-Kodak is a failing relic, I like it not only as a contrarian play, but as a turnaround story. The new business model shows real promise of revenue in 2010 and beyond. (Learn how to be a contrarian investor, see Buy When There's Blood In The Streets).
Banks
Just for the sake of simplicity I'm going to combine all the different banking industry categories into one, and broadly say that bank stocks aren't radioactive anymore.
Take SunTrust Banks (NYSE:STI) or KeyCorp (NYSE:KEY) as examples. Although neither are technically regional names, let's face it - neither are Citi (NYSE:C) or JP Morgan (NYSE:JPM). SunTrust managed to end the month about 20% higher despite a handful of downgrades. KeyCorp survived a downgrade as well, gaining nearly 30% for the month despite not having turned a profit in more than a year (with none in the foreseeable future).
I'll tow the line here and steer you toward the smaller names, and away from the bigger bank stocks this year. The numbers/results support that thesis. (Learn more about how to invest with a thesis in Invest With A Thesis.)
Automobiles
While I applaud any gain in January, to highlight Ford (NYSE: F) as one of the month's winners may be a little misleading. Ford is the American piece of the industry at this point as far as American automakers, but it was pure luck that allowed it to hit the end of the month with a gain - the stock took a couple of big hits after the early January surge, and ended the month on a sour note.
Yes, Ford swung to a profit for the first time in years, and plans on being profitable in 2010. Based on the newly-volatile chart though, now's probably not the time to go fishing.
On the flip side, when the dust finally settles, I see Ford (and only Ford for the time being) as being investment-worthy. Other than that, the other big auto industry names may already be at their max 2010 values.
Retail Stores
Retail stores may be the most unsung winners among January's leaders, yet also the most compelling. Though never explosive, the general merchandise store stocks have made up for it by being reliable and consistent. The fact that they have the weakest six-month results also offers another benefit: there's not as much overbought pressure that could potentially weigh them down.
As for the individual leader that drove these gains, you may be surprised to hear it wasn't Wal-Mart (NYSE:WMT) - it was Target (NYSE:TGT) with its 5.6% rally during January.
While Wal-Mart continues to be a Wall Street darling, having received the coveted "buy" rating from Goldman last Friday, shares of Target have actually managed to do something WMT shares haven't managed to do in the last 10 years: make net gains.
Although that factoid shouldn't matter now, there's still a reason for it (even if unknown). And, it's a reason that may be tough to overcome. That's why Target still gets my nod over Wal-Mart for 2010.
The Bottom Line
A few sectors have stormed into 2010 with some impressive (and surprising) results. Stay tuned in to the best stocks in these sectors as the year progresses: they could top the year-end best lists too.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
James Brumley
James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.
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