By Kevin Matras
September 15, 2009

Every few months, I like running this screen to find the new Top Sectors. And since roughly half of a stock’s price move can be directly attributed to its group, it’s important to stay on top of this. By definition, a strong Sector or strong Industry will have more of its companies moving higher than a weak Sector or weak Industry. If the majority of stocks are going down in an industry, it can’t be a strong industry. If more stocks are going up, it is a strong industry.

What’s interesting is that I’ve done some testing over the past and found that just getting into an average stock in a strong group will oftentimes outperform the best stocks in a troubled group. This doesn’t mean you can just pick anything and make money. Far from it. But it illustrates how powerful the underlying group is to the success of your stock picking.

One of my favorite ways to find the top Sectors is to look at the percentage of stocks trading within 10% of their 52-week highs. A lot of people like looking at the percentage price change over the last 12 or 24 weeks. That’s fine – but I don’t think its sensitive enough. For example, take the Oil & Energy sector last year. If you looked at it based on its 24-week or 12-week price performance – it was continuously ranked one of the top Sectors; even while it was collapsing. That was because the gains were so large in the first part of the 12- or 24-week period – even a large pullback over a span of many weeks can be lost within the larger run-up that preceded it.

But by checking their position in comparison to their 52-week highs, a simple 10% pullback from their 52-week highs will show up. And if more and more companies within that group are pulling back from their highs by more than 10%, it’ll be reflected in that Sector’s rating and alert the investor that something systemic might be happening to that group as a whole rather than something that’s just stock specific. And like I said at the beginning, since roughly half of a stock’s price performance can be directly attributed to the group that it’s in, it is important to be able to identify the best Sectors quickly and accurately.

So what are the current top Sectors? Glad you asked.
The top five Sectors based on the percentage of stocks at or within 10% of their 52-week highs are:
1. Retail-Wholesale — 32.2%
2. Utilities — 30.3%
3. Consumer Staples — 29.5%
4. Basic Materials — 29.3%
5. Finance — 28.6%
6. Conglomerates — 27.5%
(extra one for those who are not interested in Financials)

Retail-Wholesale is still number one from the last time I ran this in April. But back then only 14% of the companies were trading within 10% of their 52-week high. This time, it is 32%. There are also some new sectors that appear on this list, such as Utilities, Basic Materials and Conglomerates. I especially like to look at the new groups that pop up.

Here are a few stocks from each of those current top sectors (for Tuesday, 9/15/09):
CAKE – The Cheesecake Factory Inc. – Retail-Wholesale
PNM – PNM Resources, Inc. – Utilities
DMND -Diamond Foods, Inc. – Consumer Staples
BW – Brush Engineered Materials, Inc. – Basic Materials
KBW – KBW, Inc. – Finance
MMM – 3M Company – Conglomerates

All of these stocks are in the top Sectors as we’ve defined them, and they are all on the move.
Start picking stocks in the best Sectors and Industries on your own today. It’s easy to do with the Research Wizard. Start putting the odds of success in your favor.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

These are ten of the top research calls with upgrades and downgrades from Wall Street analysts this Friday morning:

Amerisafe (AMSF) Raised to Outperform at Oppenheimer.
Applied Micro Circuits (AMCC) Raised to Outperform at Oppenheimer.
Diamond Foods (DMND) Started as Buy at KeyBanc.
Dolby Labs (DLB) Cut to Neutral at JPMorgan.
Goodrich Petroleum (GDP) Started as Underweight at Thomas Weisel.
Flowers Foods (FLO) Started as Buy at KeyBanc.
QLogic (QLGC) Raised to Outperform at Baird.
Red Hat (RHT) Cut to Neutral at Baird.
Sonus Networks (SONS) Cut to Hold at Jefferies.
Urban Outfitters (URBN) Cut to Neutral at Sun Trust Robinson Humphrey.

JON C. OGG

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“Eric Torres – Spring 2008 Edit” by
Ryan Powell is licensed under a
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Based on a work at
www.dmndtv.com.

I’ve been up to a lot of shit that I have no reason not to blog about…so here it is all in one post.

- Young Jeezy concert/interview
- Kansas City and Chicago friends came to STL
- I made an awesome mixtape
- Cool Kids music video shoot for “Pennies”

ALRIGHT, HERE WE GO….

- I got to shoot at the Young Jeezy concert back on August 17th, it was sooo much fun. I was working for 247HH.com with GL-Joe and Matthias St. John and the rest of the 247HH/Ch’rewd crew. Joe hooked it up with the connections and we all were in with all-access passes. The show was completely sold out and it was so awesome having a different perspective on the show than the general public. I spent most of the time either on the side of the stage with all the CTE and BMF homies hanging around and also down in the media pit. The footage I shot was pretty sick, at least I think so but I haven’t seen it as it is all in a big office building in downtown Chicago. We also got to shoot an interview with the man himself at his hotel after the concert. He’s pretty chill and really nice. Smokes real good, too, of course. HAHA.

- The same weekend as the Young Jeezy concert, my homies from Kansas City came to town to get down on some blading. Alex, KC, and Michael kicked it for a few days and we filmed a few clips (those of which I still need to send to AJ). Matthias stayed in town for that following week and we did nothing but sweet ass shit. We took a trip to the ‘7 Gates of Hell’ and ‘Acid Bridge’ with our friend Jeni and Dan, and also hit up the City Museum…of course we did it big and had all access there too, even to the roof. Footage of both awesome adventures will be posted sooner or later.

- I made a mixtape for my good friend Marianne for her birthday. Listen to it here.

- This morning I got home from a two day trip to Chicago to shoot all of the behind the scenes for The Cool Kids new video “Pennies”. I left St. Louis Tuesday morning at 1:15 AM, got to Chicago at 7 AM and was on the set from then until 11:30 PM. I think I got to sleep around 1 AM and then woke back up at 6 AM to go back out and shoot all day long. We spent the whole day on set at an abandoned gas station and got way behind schedule, which caused the remainder of the video shoot to be pushed back to sometime next week. I left Chicago last night at 11:55 PM and slept the entire way home. When I got to St. Louis it was raining and I didn’t have a ride or money so I took my chances and snuck onto the Metrolink. I took that to the stop near my house and walked the rest of the way in the rain. That part sucked but it sure felt nice to be home and get some sleep. Too bad I’m going to miss the finale of the shoot, I wanted to see it rain pennies. I’ll post the video after the drop, keep a look out on all major TV music channels in about a month for the video as well.

GL Joe vs. Million $ Mano

Recession or not, we all need to eat. The food industry should be one place I would expect to find solid balance sheets and consistent operating performance in an uncertain economic environment.

I screened 14 food, beverage and confectionary stocks using the Company Stock Risk Profile Fast Track. Here’s what I found.

The industry has a lot of financial leverage. Long-term debt as a percentage of total capital averaged 38.2% for all 14 companies. Only three companies were below 20%, which is the Company Stock Risk Profile’s definition of low long-term debt – Coca-Cola (KO), Pepsico (PEP) and Diamond Foods (DMND). Heinz (HNZ) and Hershey (HSY) were at the high end with 70.4% and 68.3%, respectively.

This is not a consistently cash rich industry. Free cash flow at as many as six companies was not stable and declining.

Eight companies reported disappointing earnings as compared with Street expectations in at least one quarter in the latest four quarters. Street analysts have lowered earnings estimates at only two companies. Are these analysts too optimistic?

Valuation is a mixed picture. Eleven stocks had P/E’s (using trailing 12-month earnings) below the average of the high and low P/E’s for the last five years. But based on the PEG ratio (forward P/E / Projected Earnings Growth Rate), 12 stocks were overvalued relative to the industry and/or the S&P 500.

Managements have not demonstrated enthusiasm for their stocks. Kraft was the only company where management had purchased their company’s stock.

The Street on balance likes this group. There were eight stocks where more than half the analysts following them were recommending buy. The Company Stock Risk Profile and Fast Track favor stocks where less than half the analysts are recommending purchase, leaving plenty of room for ratings upgrades.

There were only two stocks that had both low long-term debt and stable or growing free cash flow. They were Coca-Cola and Pepsico. And Coca-Cola was the only stock that failed only 3 of the 10 Fast Track categories, leading me to take a closer look.

Coca-Cola’s Company Stock Risk Profile rating turned out to be Medium Risk. While the company’s fundamentals are solid, two variables raised the stock’s Risk Profile. Failing 8 of 12 valuation measures, the stock is far from cheap. And the Street is extremely bullish with 14 of the 16 analysts following the stock recommending purchase. Admittedly, I passed on Coca-Cola in March 2005 when the stock was $43 based on valuation.

The stock I find most intriguing is Kraft (KFT). Although the stock failed 4 of the 10 Fast Track categories, I broke my 3-category rule and put the stock through the complete Company Stock Risk Profile research process. Kraft is a turnaround story, so I wasn’t surprised that the Risk Profile rating was Medium. Here’s what caught my interest:

1. Kraft is one of the world’s leading food and beverage companies with such well-known and established brands as Philadelphia cream cheese, Oscar Mayer, Post cereals, Nabisco, and Kraft.
2. Kraft has new management at the top. Irene Rosenfeld was appointed Chief Executive Officer in June 2006, and also became Chairman in March 2007 following Altria’s spin-off of Kraft. Rosenfeld is a 25 year industry veteran, and came back to Kraft from Pepsico’s Frito-Lay where she was Chairman and CEO since 2004.
3. The company generated cash flow from operations of $3.6 billion last year and, after capital expenditures, free cash flow of $2.3 billion.
4. Insiders purchased stock this past February.
5. Kraft has yet to gain support on the Street. Only 4 of the 18 analysts following the stock are recommending buy.
6. Warren Buffett’s Berkshire Hathaway owns 132.4 million shares or 8.6% of the outstanding shares.

There also are negative factors to consider: (1) Management’s strategy to accelerate growth and cut costs has yet to prove successful, although top line growth is beginning to pick up; and, (2) The shares are not a bargain, having failed 7 of 12 valuation measures.

Because most Street analysts probably have low expectations, Kraft is positioned to surprise on the upside if the implementation of management’s strategy continues to move in the right direction. But the stock doesn’t yet offer the value I require to be appropriately compensated for the risk inherent in a turnaround. Nevertheless, I believe Kraft has the potential to be an attractive buy idea, and I’m going to follow the stock closely.

Website is up. Go check it out!

http://www.dmndtv.com
http://www.dmndtv.com
http://www.dmndtv.com
http://www.dmndtv.com

Let me know what you think. Thanks!

ps. the YMCA Edit & the STLxFNxWAV2 aren’t coded for quick start streaming, so they have to load all the way through before you can see them. I will be fixing this soon.

I made the whole page in photoshop, and I’m learning all the html code as I go.

It’s still under a little bit of construction, as I need to figure out the coding to make each video viewable on the same page, but in the same place….if that makes sense? if not, just hold on another day or two and you’ll see what I mean.

www.dmndtv.com

Anyways, no work tomorrow and it’s storming right now….probably into tomorrow afternoon, so if I don’t sleep late I plan on working on the site a little bit more. However I’ve got more important things to do first tomorrow such as fill out applications for school and do some much needed cleaning.

well finally got all the website shit figured out, atleast everything to do with the hosting and server. thank you boris for the help. now i just have to relearn html and come up with something that turns out how i want it…

feel free to check out day 1 of the site by clicking the picture above.

official launch coming soon, keep checking back for updates.

seriously, making a website is SO FUCKING HARD. i feel like im probably going to have just wasted my money buying a domain name because this shit is not working out…at all. also, my internet has just been fucking up all night. i wouldnt doubt that my shit was hacked or something and all my money is going to be taken from my bank accounts or something crazy like that….knock on wood.

anyways, ive slept for like 5 hours in the past 2 days…and i’m already short on sleep from Bittercold Showdown last weekend. a picture post from that will be coming up tomorrow if i have time between my shifts at work.

oh yea, Adam Johnson is making a BCSD edit. its going to be awesome. ill post a link to that too once its up.

anyways, wish me luck with all this website building because i really need it. its like, i know how to do the coding and all that good stuff, but i just cant get any pages to actually work because i cant figure out how to upload pages. its incredibly frustrating. ok time for a much needed 5 hour sleep, p.