Cramer: The 12 Strongest Sectors Going Into Earnings

 | Oct 02, 2017 | 6:28 AM EDT
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We are going into the month of October with a head of steam in some groups that is unimaginably strong, and, yes, unimaginable.

Given that we are going into earnings it is rather strange, and, I should add, incredibly healthy to see so many stocks running into the quarters from so many sectors. Normally, I would be worried if there were so many stocks acting so strongly going into earnings, but the plethora makes me think that even if they get hit, you buy 'em.

Without further ado, here are the 12 strongest sectors I see from examining the charts.

First, the banks. I cannot believe how strong they are. It doesn't matter if it is a bank like First Horizon National Corporation (FHN) , or KeyCorp (KEY) or the JP Morgan (JPM) and the Wells Fargo (WFC) ; the charts are insanely strong. Given that these companies are set to report after the employment number, if you own these you want as strong a payroll creation as possible.

Second, the asset managers. BlackRock (BLK) is the leader, but T.Rowe's (TROW) stock is emblematic of what I like so much here. If you want a more in-depth look into this specific stock, our resident technical analyst Bruce Kamich just published a great article on TROW's charts. 

The smaller brokerages, like The Charles Schwab Corporation (SCHW) are running too, and that's a classic sign of bull market action. This group had been rolling over or been an anchor to leeward for ages. No more: it's about leadership from here.

Nothing's changed about insurance, except that it's gotten strong, led by the brokers; but those with car exposure are plenty strong. I say this is all about the storms. Rates going higher after storms? Of course.

We may be in awe of Amazon (AMZN) , but perhaps we aren't paying enough attention to the discount retailers. The dollar stores not only seem to be able to compete with Amazon, maybe they are winning. I really like Dollar Tree (DLTR) here, especially because there are so many Family Dollars (FDO) left for it to convert to much nicer stores.

Burlington's (BURL) strong and The TJX Companies (TJX) is incredibly close to breaking out. Big Lots BIG, a store I don't really care for, is the strongest of the group.

Next is a group that, like so many others, was headed down before the storms: the auto parts. Now, this is a strange grouping: we have both companies that make auto parts for do it yourself-ers and parts that are for new cars. Given the strength in General Motors (GM) , we have to say this is all about Houston, which I think destroyed the peak auto thesis. Again, I believe the shorts had been pressing these stocks down and were just blindsided by Harvey.

Now, oil's not been able to go convincingly above $52 and natural gas has gone nowhere, so imagine my surprise when I see these stocks doing incredibly well. I don't know what to say about this group. Should Cabot Oil & Gas (COG) be as high as it is? Is Schlumberger (SLB) set to break out? Is there really a turn in the offshore oil companies? I cannot understand this strength; it is well ahead of the fundamentals. But wasn't that the case on the downside? Cimarex (XEC) , by the way, seems to be on the launching pad.

All of health care has been terrific of late, but I think the medical device group has some of the greatest momentum. I like Baxter (BAX) and Becton Dickenson (BDX) as total standouts.

Transports, both truckers and railroads, are just insane. I simply do not understand this strength. Nor do I understand the strength of the truckers. I do not see the earnings momentum or the demand to justify it. I have to believe it must be because of the rebuild of Houston and Florida, coupled with a weak dollar that's driving cargoes overseas. Of all the mystifying moves, this one takes the cake. We better see some really good numbers from these companies.

The homebuilders and the home-related stocks are having a run that's incredible. The homebuilder strength is much more of a recognition of how well these companies have been doing for ages, than anything new. But the home-related stocks, including Home Depot (HD) , are again, all about the rebuild.

Number 11? Anything semiconductor. It's just indiscriminate. Texas Instruments (TXI) , Analog Devices (ADI) , Cypress Semi (CY) . You name it. Of course, all semiconductor equipment companies are included.

Finally, the cloud stocks deserve every shout out you can give them. ServiceNow (NOW) is the leader. Watch Autodesk (ADSK) . Workday's (WDAY) a beast.

Now, the fact is I could have highlighted another half-dozen or so groups: defense, agriculture, fintech, e-com. But they have been strong all year. The stocks I've mentioned here, with the exception of the insurers, are truly the new winners of the second half. I wouldn't get in the way of them, I'd just get in them. In my opinion, they are going higher.


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