Updated with earnings results from AGCO and TransDigm.
NEW YORK (
) -- Find out what to extract from stock performance so far this year, as well as what Wall Street is saying about aerospace, financial and media stocks.
1) Almanac Tricks
One of the most popular adages at the beginning of the year is "as goes January, so goes the year." Most of Wall Street knows this phenomenon as the January Barometer. But Sam Stovall, chief equity strategist with S&P Capital IQ, points out another historic trend that investors should know about. This one is called the January Barometer Portfolio, which looks to sector performances in January for clues of what will happen the following 12 months.
"Since 1990, a portfolio consisting of an equal weighting to the three best performing sectors in January posted a compound annual growth rate of 8% in the following 12 months (February through January), versus 6.6% for the S&P 500, and beat the market in nearly two of every three years," writes Stovall.
Narrowing down to sub sectors tends to yield even more returns. Stovall adds that "a portfolio consisting of an equal weighting to the 10 S&P 500 sub-industries with the best January performances went on to post a 12-month compound annual growth rate of 14.4% versus 6.8% for the S&P 500 (excluding dividends)," according to data since 1970. "What's more, this January Barometer Portfolio of sub-industries beat the market nearly 70% of the time."
Stovall warns, of course, that what works in the past doesn't always work again in the future.
Case in point -- last year both the sector and sub industry portfolios underperformed the broader index. Investors using the January Barometer Portfolio strategy would only have seen the three best sectors gain 0.5% and the ten best sub-industries gain 0.6%. By contrast, the S&P 500 notched 2% in the year ending Jan 31, 2012. The three best sectors last January were consumer staples, telecommunications and utilities.
Nevertheless, for investors wanting to give this almanac trick a try this year, the three best performing sectors in January were financials, informational technology and material stocks. The ten best performing sub industries, also on the S&P 500 index, were aluminum, construction & farm machinery & heavy trucks, diversified metals & mining, fertilizers & agricultural Chemicals, internet retail, investment banking & brokerage, life sciences tools & services, multi-sector holdings, other diversified financial services, and real estate services.
Only a few ETFs track the S&P 500 sub sectors, so Stovall picks 10 individual stocks to serve as proxies:
(AA - Get Report)
(CBG - Get Report)
(CMI - Get Report)
(JPM - Get Report)
(MOS - Get Report)
(PCLN - Get Report)
. Stovall picked these stocks using the MarketScope Advisor's screening tool, which selects the stocks with the highest S&P STARS, or highest market value.