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Which Sectors Will Benefit the Most From an Economic Recovery? |
June 25, 2009 By Nick Atkeson & Andrew Houghton, Editors of Big Money Options |
Houghton and Atkeson
Andrew Houghton and Nick Atkeson work together to identify options trading opportunities on the institutional level and, now, for OptionsZone.com readers. They are the editors of Big Money Options, an options trading service that provides one to two new opportunities each week based on their findings.
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Three Sectors Set to Benefit Most From an Economic Recovery
In determining which sectors will benefit the most from an economic recovery, our bet is they will be the sectors that started to recover the soonest and are continuing to show leadership today.
On the group level, the three stock groups with the best overall relative strength dating back to the first week in February 2009 are:
- consumer discretionary
- consumer staples
- energy
And within these groups, the smaller capitalization companies are having the strongest runs.
Recovery Beneficiary #1: Consumer Discretionary
Consumer discretionary stocks are by far the strongest measured by relative strength. All of the top five strongest sectors in the S&P 500 are consumer discretionary sub-industry groups. In order, they are:
- Tires and Rubber
- Auto Dealers
- Restaurants
- Casual Dining (micro cap)
- Men's Apparel Retailers
- Book Stores (this does not include Amazon.com)
What the price of stocks rolled up into industry groups is saying is that the hardest hit consumer areas will be some of the first areas to recover and have the potential to rebound with higher absolute and percentage gains than other sectors.
Automobiles (dealers and parts) may show a tremendous bounce as: (1) the existing dealer base is reduced, (2) GM, Chrysler and Ford focus on selling fewer, but better, cars and (3) Congress potentially enacts short-term stimulus legislation directed specifically at the car industry (e.g., a cash-for-clunkers law much like what has already been enacted in many European countries).
Strongest Consumer Discretionary Stocks
After running these strong consumer discretionary groups through both technical and fundamental screens, the stocks that stood out as most attractive now are:
- Group 1 Automotive Inc. (GPI)
- Asbury Automotive Group (ABG)
- Carrols Restaurant Group (TAST)
- Books-A-Million Inc. (BAMM)
For the consumer staples and energy stocks best poistioned to benefit from an economic recovery, click here now. Plus, get details on a fourth sector to hedge your bets.
