Author: Kenley Scott

Kenley Scott is a senior equity analyst and sector strategist covering the APAC region and the Energy sector. He is a member of the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets. Kenley also writes the Global Sector Summary, part of the Sector Strategy service, which identifies emerging sector strength and weakness across 46 countries every week. After working as a commodities broker, Kenley joined the firm in July 2006. He has a B.S. in Statistics from the University of California, Riverside and also holds a Series 65 securities license.

Global Energy Sector

Posted on October 31, 2018February 1, 2019 by Kenley Scott

World Economic Outlook

According to the IMF’s October World Economic Outlook titled ‘Challenges to Steady Growth,’ growth in 2018 has accelerated from the prior five years but may begin to slow from 2019 on. A pickup in growth for emerging and developing economies may not be enough to offset a deceleration in advanced economies.

Additionally, the IMF slightly downgraded its expectations for this year and next. It now expects 3.7% growth in 2018 and 2019, 20bps below its views from April 2018. Causes for the downgrade included lower expectations in the eurozone,
the U.K., South Korea, Brazil, Argentina, Mexico, Iran, as well as China and India. It listed factors including trade tariffs, higher energy costs, and tighter financial conditions.

Global Sector Commentary

Posted on October 26, 2018March 27, 2019 by Kenley Scott

Key points:

The Russell Global breaks to 52-week lows. At 8% below its 40-WMA, nearing levels last seen in 2015–2016. In that case, rallied off lows for two to three months before making a lower low in January 2016.

Similarities in both the index setup and overlay of breakout counts in the 2015–2016 period and currently.

A recovery in both the index and number of breakouts will not be enough to change the trend. We need to see a sustainably higher number of breakouts (i.e., 2017 period), which could take months to develop.

Global Sector Commentary

Posted on October 19, 2018February 1, 2019 by Kenley Scott

Key points:

A huge change in trend in the U.S. in the first three weeks of October from the prior 17 months, as prior leading groups (software, medical devices, and Retail) are selling off in favor of defensives.

We favor being in cash, but if you need to shift to defense, there are a good amount of stocks to choose from.

Consumer Staple: Coca-Cola ( KO ), Procter & Gamble ( PG ), Mccormick ( MKC ), *Nomad Foods ( NOMD ), Calavo Growers ( CVGW ), Hershey ( HSY ), Archer-Daniels Midland ( ADM ), Hormel ( HRL ), Cal-Maine Foods ( CALM ), Pepsi ( PEP ), *Lamb-Weston ( LW ), Post Holdings ( POST ), Lancaster Company ( LANC ), JJ Snack Foods ( JJSF ), Freshpet ( FRPT ).

Utility: NextEra ( NEE ), NextEra Energy Partners ( NEP ), American Electric Power ( AEP ), Eversource Energy ( ES ), First Energy ( FE ), AES ( AES ), Exelon ( EXC ), Public Services Enterprise Group ( PEG ), WEC Energy ( WEC ), Ameren Corp ( AEE ), CMS Energy ( CMS ), NRG Enery ( NRG ).

Other defensive (some Telecom, Health Care, Retail): Verizon ( VZ ), T-Mobile U.S. ( TMUS ), Harris Corp ( HRS ), Cable-One, Disney ( DIS ), Johnson & Johnson ( JNJ ), Merck ( MRK ), *Zoetis ( ZTS ), *United Health ( UNH ), Anthem ( ANTM ), Cigna ( CI ), Dollar General ( DG ), Walgreens Boots Alliance ( WBA ), Sprouts Farmers Markets ( SFM ), Wal-Mart ( WMT ), Costco ( COST ).

Global Sector Commentary

Posted on October 12, 2018February 1, 2019 by Kenley Scott

Key points:

The Russell Global had a clear breakdown this week. U.S. and major European markets, which had held better previously, all broke down this week.

Screening the entire investable universe of >$1B market cap and $3M ADV stocks (6,400 stocks), there are only 110 which are 1) within 10% of 52-week highs, 2) above their 200-DMA, 3) traded higher this week, 4) have traded higher in the trailing four weeks. Of these, 44 with the best charts are included below.

Global Sector Commentary

Posted on October 5, 2018February 1, 2019 by Kenley Scott

Key points:

With many global markets selling off sharply this week, focus on improving Relative Strength.

In the U.S., Energy, Cap Equipment, Health Care, Utility, and Transportation all have improving Relative Strength.

In terms of names, using a screen of >$1B market cap and $5M ADV, >=-8% off highs, above 50-DMA, >=70 RS Rating, >=+5 RS Rating from five weeks ago, >=5% current year sales growth, >=8% current and next year EPS growth, and at or near a reasonable entry point, we get 33 stocks that could be good candidates to help weather the recent storm while also providing upside should the market resume its uptrend.

Global Sector Commentary

Posted on September 28, 2018February 1, 2019 by Kenley Scott

Key points:

After a much stronger Q3 period than average for the second year of a presidency (S&P 500 up 7% in 2018, versus -1% on average), we move into October, which has very strong historical averages across indices and sectors.
Three of the four best sectors in October, Tech, Transports, and Health Care, are already leading. The fourth, Consumer Staple, is the worst performer over the long term.
One actionable name from each of these sectors heading into October: Autodesk ( ADSK ), Old Dominion Freight Line ( ODFL ), Abiomed ( ABMD ), and Nomad Foods ( NOMD ).

Global Sector Commentary

Posted on September 21, 2018February 1, 2019 by Kenley Scott

Key points:

Following a big breakout in Japan over the past two weeks, there has been short-term improvement across other large APAC markets in China/Hong Kong.

While still early on, and with indices still well below their 40-WMA with significant overhead resistance, it is still a good time to search for new ideas to buy should the improvement persist.

In addition to recent Focus List additions from overall stronger markets, such as Biocon ( BBB.IN; BIOS IN ), ICICI Lombard General Insurance ( ILG.IN; ICICIGI IN ), Taiwan Semiconductor Manufacturing ( TSM.TW; 2330 TT ), and PTT Exploration and Production ( PTTE.TH; PTTEP TB ), a couple of new ideas from China/Hong Kong include China Resources Cement Holding ( CRCH.HK ), Techtronic Industries ( TRON.HK ), Foshan Hai Tian Flavoring ( FHT.CN ), and Winning Health Technology ( KWS.CN ).

Global Sector Commentary

Posted on September 14, 2018February 1, 2019 by Kenley Scott

Key points:

As most global markets rebounded this week, Japan was a clear standout, with the Nikkei 225 rising 3.5% and breaking above what had been clear resistance at ¥23,000.

Yen weakness is giving stocks a boost, in particular export-heavy sectors like Capital Equipment, Cyclical, and Technology. Other long-term leading sectors, including Health Care, Retail, and Staples, still have favorable areas.

Below is a list of Focus List ideas (in green) and other names with strong setups and moderate to good growth from one of the sectors mentioned above.

Global Sector Commentary

Posted on September 7, 2018February 1, 2019 by Kenley Scott

Key points:

Global indices EFA and EEM at new 52-weekly closing lows. Stoxx 600 better but mainly driven by lack of currency translation (Stoxx 600 in local currencies, EFA/EEM in U.S. dollars).
U.S. much better still on three bases: 1) All major indices above 50-DMA and within 1-3% of highs, 2) Focus List count still healthy at 74, versus 90 for all other global markets combined, and 3) actionable list is still healthy.

Global Sector Commentary

Posted on August 31, 2018February 1, 2019 by Kenley Scott

Key points:

The Nasdaq Composite is the leading major global market year-to-date, up 17% through August. The average developed market is flat and the average emerging market is down 2%.

Adding currency widens the spread further. The average currency is down 5% (median -3%) versus the U.S. dollar year-to-date.