This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages in each industry. <\/p>\n
Relative to their historical averages, Semiconductors look slightly undervalued and Communication Equipment very close to fair price. IT Services, Hardware and Electronic Equipment seem moderately overvalued. Internet, Software and Telecommunications are overpriced by more than 30% regarding my metrics. All IT and Telecom industries are better than their historical averages in profitability (measured by median ROE). <\/p>\n
Since last month: <\/p>\n
P\/E has improved in IT services, Communication\/Electronic Equipment, Semiconductors, and Diversified Telecom, and deteriorated in Hardware, Internet, and Wireless Telecom. <\/p>\n
P\/S has improved in IT services, Communication\/Electronic Equipment, and Hardware, and deteriorated in Semiconductors and Telecom. <\/p>\n
P\/FCF has improved in Electronic Equipment, and deteriorated in Internet, Communication Equipment, and Telecom. <\/p>\n
ROE has improved in Internet and Telecom, and deteriorated in Hardware. <\/p>\n
The Technology Select Sector SPDR ETF (XLK) has outperformed the SPDR S&P 500 ETF (SPY) by about 1.5%. <\/p>\n
On this period, the 5 best performing S&P 500 Tech or Telecom stocks are Apple (AAPL), Automatic Data Processing Inc. (ADP), Electronic Arts Inc. (EA), Verizon Communications Inc. (VZ), and Xerox Corp. (XRX). <\/p>\n
The stocks listed below are in the S&P 1500 index and cheaper than their respective industry factor for Price\/Earnings, Price\/Sales and Price\/Free Cash Flow. The 10 companies with the highest Return on Equity are kept in the final selection. <\/p>\n
This strategy rebalanced monthly has an annualized return about 12.76% in a 17-year simulation. The sector ETF XLK has an annualized return of only 2.83% on the same period. I update every month 8 lists like this one covering all sectors (some sectors are grouped). The 8 lists together have returned about 25% in 2016. If you want to stay informed of updates, click \"Follow\" at the top of this page. My Marketplace Subscribers have an early access to the stock lists before they are published in free-access articles. Past performance is not a guarantee of future result. This is not investment advice. Do your own research before buying. <\/p>\n
Plantronics Inc. (PLT) <\/p>\n
COMMEQUIP <\/p>\n
Seagate Technology Plc (STX) <\/p>\n
COMPUTER <\/p>\n
Bel Fuse Inc. (BELFB) <\/p>\n
ELECTREQUIP <\/p>\n
Cirrus Logic Inc. (CRUS) <\/p>\n
SEMIANDEQUIP <\/p>\n
SolarEdge Technologies Inc. (SEDG) <\/p>\n
SEMIANDEQUIP <\/p>\n
Citrix Systems Inc. (CTXS) <\/p>\n
SOFTW <\/p>\n
CSRA Inc. (CSRA) <\/p>\n
TECHSVCE <\/p>\n
MAXIMUS Inc. (MMS) <\/p>\n
TECHSVCE <\/p>\n
NeuStar Inc. (NSR) <\/p>\n
TECHSVCE <\/p>\n
Science Applications International Corp. (SAIC) <\/p>\n
TECHSVCE <\/p>\n
I take 4 aggregate industry factors provided by portfolio123: Price\/Earnings (P\/E), Price to sales (P\/S), Price to free cash flow (P\/FCF), and Return on Equity (ROE). My choice has been justified here and here. Their calculation aims at limiting the influence of outliers and large caps. They are reference values for stock picking, not for capital-weighted indices. <\/p>\n
For each factor I calculate the difference with its own historical average: to the average for valuation ratios, from the average for ROE, so that the higher is always the better. The difference is measured in percentage for valuation ratios, not for ROE (already in percentage). <\/p>\n
The next table reports the 4 industry factors. There are 3 columns for each factor: the current value, the average (Avg) between January 1999 and October 2015 taken as an arbitrary reference of fair valuation, and the difference explained above (D-xxx). <\/p>\n
P\/E <\/p>\n
Avg <\/p>\n
D- P\/E <\/p>\n
P\/S <\/p>\n
Avg <\/p>\n
D- P\/S <\/p>\n
P\/FCF <\/p>\n
Avg <\/p>\n
D- P\/FCF <\/p>\n
ROE <\/p>\n
Avg <\/p>\n
D-ROE <\/p>\n
Internet <\/p>\n
53.99 <\/p>\n
38.33 <\/p>\n
-40.86% <\/p>\n
4.01 <\/p>\n
2.93 <\/p>\n
-36.86% <\/p>\n
37.55 <\/p>\n
29.72 <\/p>\n
-26.35% <\/p>\n
-18.06 <\/p>\n
-26.83 <\/p>\n
8.77 <\/p>\n
IT Services <\/p>\n
28.67 <\/p>\n
23.34 <\/p>\n
-22.84% <\/p>\n
1.6 <\/p>\n
1.16 <\/p>\n
-37.93% <\/p>\n
21.7 <\/p>\n
18.68 <\/p>\n
-16.17% <\/p>\n
6.26 <\/p>\n
2.42 <\/p>\n
3.84 <\/p>\n
Software <\/p>\n
52.77 <\/p>\n
33.79 <\/p>\n
-56.17% <\/p>\n
4.21 <\/p>\n
2.81 <\/p>\n
-49.82% <\/p>\n
35.24 <\/p>\n
23.95 <\/p>\n
-47.14% <\/p>\n
-5.55 <\/p>\n
-8.17 <\/p>\n
2.62 <\/p>\n
Communications Equipt <\/p>\n
28.63 <\/p>\n
28.48 <\/p>\n
-0.53% <\/p>\n
1.67 <\/p>\n
1.61 <\/p>\n
-3.73% <\/p>\n
28.54 <\/p>\n
24.1 <\/p>\n
-18.42% <\/p>\n
-1.22 <\/p>\n
-9.61 <\/p>\n
8.39 <\/p>\n
Computers\/Peripherals <\/p>\n
25.55 <\/p>\n
<\/p>\n
See more here:<\/p>\n
Valuation Dashboard: Technology And Telecom - Update - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" This article series provides a monthly dashboard of industries in each sector of the GICS classification. It compares valuation and quality factors relative to their historical averages in each industry Continue reading