Sabrient - Monthly Analysis of the Market Based on Sabrient Filters

The Ugliness Continues

Last month, the best you could do index-wise was the Russell MidCap Growth (-1.62%). The worst was the Nasdaq (-4.95%). Almost everything was down between 3 and 4%.

For the trailing 12 months, not a single index included in our wrap was positive. The DJIA was down slightly (-0.02%) while the Russell MicroCap Value was dreadful (-21.25%). In case you care, the NASDAQ was down 6% for the trailing 12 months, the S&P500 down 5.4%. Not a pretty picture.

Growth reverted to losing less than value in February, about 2% less in both large-caps and mid-caps, but in the small-cap universe growth was less than 1% ahead. For the YTD, value holds a slight edge.

Was there anything the market rewarded last month? Not much, but again there were some pockets of happiness. Once again, Sabrient’s Value Regression Filter did reasonably well with positive returns for the Top 50 in large-caps and small losses elsewhere.

Somewhat surprisingly, it was a momentum month with Group and Price Momentum Filters showing very decent profits in large-caps and small profits in mid-caps and small-caps. Also, following positive analyst changes kept you out of trouble.

As has been the case for several years, companies with strong cash flow growth made a bit or, at worst, had small losses in February. So GARP, cash flow, and positive analyst changes kept you out of trouble as they have for many months, while momentum actually made solid gains, for February at least.

From a sector viewpoint, materials continued to fare quite well, up 6% for the month, as was energy. Financials reverted to a sizable 6% cap-weighted loss (about 3% loss for an average financial stock). Other sectors were somewhere between the good guys and bad guys. Incidentally, homebuilding followed financials back into the tank, losing 6% on a cap-weighted basis and 2.4% on an average basis.

In summary, the materials sector continues to be a good place to be; financials are not. Other areas of lower risk are companies with solid GARP numbers and/or cash flow growth or upward earnings revisions by analysts. Follow momentum at your own possible peril.

David Brown

Next update: Second week in April.