This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Stocks Poised for Rebound, History Shows

BOSTON ( TheStreet) -- If you're worried that bad Italian bonds and beaten-down eurozone stocks will infect your portfolio, it's time to consider what may be the top investment refuge today: U.S. industrial and materials stocks.

There are a couple of issues at work to support that contention.

First, U.S. equities have just entered their best six-month period, at least according to market history. Since 1945, the S&P 500 Index has gained an average of 6.8% from November through April, compared with a rise of only 1.2% from May through October, according to research by S&P Capital IQ.

Even more compelling is that since 1990, stocks in the industrial and materials sectors have beaten the S&P 500's 6.7% increase 76% of the time from November to April, 14 percentage points more than the second-place industry. Materials shares returned an average of 10.4% in that period and industrials climbed 9.4%.

Also worth noting is that industrial and materials stocks do best in the early stages of an economic recovery, which could be the case today.

But so far this year, industrials and materials have been losers. As of Nov. 8, industrials stocks are down 2.9% and materials are down 6.3% versus the S&P 500's 1.5% gain.

And it's important to note that the volatile and highly correlated markets of today behave quite differently than those of even 10 to 15 years ago and, as such, cast a shadow on the worthiness of long-term statistics.

Sam Stovall, chief equity strategist at S&P, said in a research note this week detailing the historic trends that, "if the flow this year mimics that of other years, it may be better to adopt a more cyclical mindset, despite the planet's present plethora of perplexing problems."

Indeed, those problems are continuing. Alec Young, S&P Capital IQ's global equity strategist, told TheStreet that even though the U.S. economy appears to be moving away from the threat of another recession, "there's just no getting away from Europe" and what the impact of a failed Italian economy could mean to stocks worldwide.

His firm's latest 12-month target for the S&P 500 is 1,360, a 10.6% premium to the current level, "much lower than most Wall Street firms," Young said, "but we're still looking for stocks to move higher."

The materials sector represents a wide range of commodity-related manufacturing industries, including: chemicals, construction materials, metals, minerals, mining, glass, paper, forest products and related packaging products.

Top-performing exchange traded funds (ETFs) in the sector include a slew of gold-focused funds led by iShares Comex Gold Trust (IAU), up 26% this year. The leading materials ETF is the Vanguard Materials Index Fund (VAW), down 4.7%.

The industrials sector includes companies involved in aerospace and defense, construction, engineering and building products, electrical equipment and industrial machinery. The sector's stocks grew by an average of 24% in 2010, versus a 12.8% increase for the S&P 500. Defense and aerospace companies have done the best of the category and are up an average of 6% this year.

Among ETFs in the industrials sector, the Vanguard Industrials Index Fund (VIS), is down 3.5% this year, while the iShares Dow Jones U.S. Aerospace and Defense Index Fund (ITA) is up 3.5%.

The following are 10 of the top-performing materials and industrials sector stocks:
1 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
IAU $10.58 -0.24%
ITA $118.00 -0.62%
VAW $102.06 0.11%
VIS $104.23 -0.39%
RGLD $50.56 -1.00%

Markets

Chart of I:DJI
DOW 17,672.49 -78.90 -0.44%
S&P 500 2,100.94 -7.63 -0.36%
NASDAQ 5,093.5770 -18.1560 -0.36%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs