Strong Choices From Leading Sectors

 | Dec 16, 2011 | 4:30 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

ee

,

chd

,

biib

Once a week or so, check the S&P 500 sectors to see what has rotated in or out of leadership. This year, there have been some big changes at the top as a result of market volatility.

But with December winding down, I wanted to see which sectors appear to be closing the year with the best gains. The results were not surprising. The utilities sector is the best performer, with a year-to-date gain of 10.85%, aided by investors flocking into stable dividend payers and large-caps.

Other defensives are looking to be year-end leaders. Consumer staples shows a 2011 gain of 7.44%, with healthcare up 6.43%.

I'll often use S&P sector strength as a starting point for further stock research. In this case, I ran some scans and found that El Paso Electric (EE), a constituent of the S&P SmallCap 600 index, is one of the best performers from the utilities sector.

The stock is forming a potentially bullish price consolidation near its 10-week line, although the character of trading was more erratic than usual over the past several months, consistent with general market volatility.

The stock currently has a dividend yield of 2.7%. Earnings growth is seen declining by 2% next year, to $2.42 a share.

Institutions have gotten on board in recent quarters, and for investors looking for small-cap exposure, this could be one to watch. I'd like to see the price rebound above price resistance at $34.85.

El Paso Electric has posted a 2011 gain of 20%.

From consumer staples, S&P MidCap 400 component Church & Dwight (CHD) is a top performer. The stock has a market cap of around $6.3 billion and it trades about 750,000 shares a day, not bad liquidity.

The company makes a number of familiar household brands, including Arm & Hammer, OxiClean and Orajel toothache remedies.

The stock is up nearly 30% year-to-date. It's been getting 10-week support lately after rebounding from an Aug. 8 low of $36.78. Its August breakdown appears to have been constructive, flushing out traders and investors lacking in conviction, with more confident buyers subsequently stepping in.

As with many consumer staples companies, Church & Dwight's revenue and earnings growth is solid but not explosive. Wall Street sees income growing at a rate of 10% in 2012.

The current overall market weakness gives me reason to be cautious about any investment candidate, but this is a name to track for mid-cap exposure.

The third leading sector for the year, healthcare, has a number of contenders from all market caps. One that emerged near the top of my scan, however, was benchmark index component Biogen Idec (BIIB). The large-cap has shown outstanding price strength in 2011, advancing 64% so far.

That might suggest the stock is ready for a breather. It's currently consolidating in an orderly fashion above its 10-week line. However, the stock sported even more bullish technical action as it rebounded from a bottoming base with an August low of $83.83.

The Massachusetts biotech develops treatments for multiple sclerosis, cancer and autoimmune diseases, among other ailments. Analysts expect 2012 earnings growth to slow to 7%, to $6.31 per share. Biogen has a good history of annual earnings increases.

This is a stock I would easily put on a watch list and monitor for a heavy-volume price gain above its all-time high of $120.66, reached in October.

Columnist Conversations

TrueCar, Inc. (TrueCar) is a data-driven online platform operating a technology infrastructure, powered by dat...
Financial Planning magazine reports that... The Internal Revenue Service is considering regulations to limit t...
MMM is rolling over. Early last week the stock began to fall out of a steep bull channel before retestin...
Higher tariffs are a sign of increased floating inventories that will be available for immediate withdrawal on...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.