While this Consumer Discretionary group has not experienced six-plus-years of market outperformance, we think it may be poised for a late-game bounce. An overall lack of housing options may be just what this industry needs to give it a long-awaited boost.
The last time this group held an Attractive rating for an extended period of time was 2000. Based on the group’s extended underperformance, induced by repercussions of the global financial crisis, we think it may finally be poised for a turnaround.
While we view the industry group selection as the most important decision, looking at the sector level rankings also helps us identify broad trends. Here we highlight the top two rated sectors, currently, which also represent a combined >40% weight in our Select Industries Portfolio.
Until now, this group has been out of favor per our quantitative disciplines for the entirety of the bull market, making its newfound attractiveness particularly interesting. Even an 80% return in 2013 hasn’t brought relative performance back to levels achieved during the previous bull market.
A new position in Drug Retail was added to the Select Industries Portfolio in April. The latest update to the Group Selection (GS) Score showed improvement in several factor categories which pushed the overall score back to Attractive.
Reinsurance has rated Attractive for a little over one year, but the latest round of GS Scores sent this group’s score skyrocketing, and it now ranks fourth highest among all 115 industry groups. Select Industries Portfolio overall insurance industry group exposure now 8.1%.