Author: Kenley Scott

Key points from this report:

• Through 321 names reporting, median S&P 500 sales and EPS growth of 8% and 24%, y/y, respectively. Sales growth is on-pace to be the highest since Q2 2018, and EPS is on-pace to be the highest in more than a decade.
• Sales beats are about twice the typical median of around 1%, while EPS beats are also about twice the typical median of around 4%.
• All 11 sectors have shown accelerating growth versus full-year 2020. Six sectors (Material, Cyclical, Retail, Health Care, Tech, Utility) have double-digit top- and bottom-line growth and four sectors (Material, Cyclical, Tech, Transports) have EPS growth of at least 38%.

Key points from this report:

• Global Health Care is picking up after a long period of underperformance. True in U.S., EMEA, and APAC regions.
• In the U.S., it competes with Retail/Staple for the best performing sector in the very long term (1970-2021).
  • Health Care has led the S&P 500 in each of the past five decades through 2019. However, it does trail by a bit in the first year and a half of the new decade.
  • Contributors were generics and biotech early on, but products, managed care, equipment, home care over the past two decades.
  • Over the trailing year it has lagged around 17% versus the S&P 500. This has only been worse a handful of times since 1970.

Key points from this report:

• U.S. (large), developed (EFA), and European indices (EXSA.DE) are all at all-time highs.
  • U.S. standout areas are based on recent breakout totals in U.S. large-cap Technology, Health Care, non-Bank Financials, and Capital Equipment.
  • Developed Europe standout areas are Capital Equipment, Cyclical, Health Care, and Retail.
• Emerging and Asia are more mixed due to U.S. dollar strength, heavyweights like Hong Kong/China, and individual stocks from a variety of countries continuing to lag.
  • Best acting emerging areas are Taiwan, Korea, and smaller markets like South Africa, Greece, Mexico, Chile, and Saudi Arabia.
  • Standout areas based on recent breakouts from those markets are Materials, Cyclicals, and Tech (hardware).

Key points from this report:

• In terms of sector performance, heading into this earnings season: Every sector clearly outperformed their historical Q1 average within the first year of a presidency.
  • Energy, Transports, Cap posted outsized gains. Tech/HC and  Staple/Utility lagged, in line with historical weakness.
• Q2 is a strong quarter historically, with index gains averaging 4-8% (including small caps with performance from 1988-2021).
  • Financial, Cap, Tech, HC, Cyclical have best averages, while Energy and Materials lag.
• For Q1 earnings:
  • S&P 500 groups to watch include HC, Retail, Tech, all expected to show continued strong y/y growth but deceleration for full-year 2021.
  • Cyclical and Material among best EPS expectations, but performance is extended versus the market.
  • Small caps and Cyclicals are the top growers, but look for outlook to confirm strong full-year expectations.

Key points from this report:

• Huge outperformance for Consumer Cyclicals versus all other sectors from March 2020 lows.
• Utility led all sectors, rising 10% in March for its seventh-largest monthly gain ever and its largest since 2003.
• In March, Consumer Staple was up 7%, behind only Utility and Transportation. Unlike Utility, the group is near all-time highs but, on a relative basis, it just touched a decade low before a Q1 2021 bounce.
• In both Utility and Consumer Staple, and mixing defensive and growth, a few ideas include MNST, NOMD, FRPT, TAC, HE, DTE, NEE, EL, and LRLCY.
• Ideas that provide stability with some potential upside are CHD, SAM, SMPL, STZ, AES, ATO, KDP, AWK, and ECL.

Key points from this report:

• Buy the dip has shifted from growth (Technology/Health Care) to other areas (Industrial, Financial, Material, Transport).
  • Trailing five-year winners in Technology/Health Care (portions of Retail/CC/Energy) have substantial overhead and areas of resistance to work through should they establish lows.
  • Areas like the others above have much less overhead and are immediately finding support off rising moving average levels.