ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.
The nauseating market volatility of the past six weeks makes this a good time to take stock. Ranking all the TSX market sectors uncovers surprising outperformance by auto stocks and insurance companies while technical analysis suggest three sectors – real estate, utilities and telecommunications – are due for a bounce.
The table below shows the performance of each domestic industry sector since May 1, 2013 and along with the percentage in forward price to earnings ratio. (The forward P/E ratio includes both the change in stock price and changes in analyst estimates).
Thanks to Valeant, the S&P/TSX Pharmaceutical and Biotech was the top performer, followed by the auto index which consists of only three companies – Magna International Inc., Linamar Corp and Martinrea International Inc. The almost five per cent jump from insurers is probably the most notable result for the period (link to MFC spreads post).
In looking at forward P/Es, the ideal situation would be a sector that is performing well and getting cheaper. That would happen if analysts were raising earnings expectations faster than the stock is going up. No such luck here. But it is interesting that the S&P/Real Estate Sector is now 20 per cent cheaper, based on forward P/E, since May 1.
Real estate stocks are also attractive from a technical analysis perspective. The sector's relative strength index stands at 24.26, well below the oversold level of 30. Utility and telecom stocks are also below the 30 level which suggests that a bounce, or at least a short-term one, may be in the offing.
Hopefully, readers can use the charts as a starting point and begin searching for value amid the market carnage of recent weeks. The yield-bearing sectors – real estate, utilities and telecoms – look like a good place to start.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights , and follow Scott on Twitter at @SBarlow_ROB .
The Globe is launching a Streetwise and ROB Insight newsletter, with content available exclusively to Globe Unlimited subscribers. Get the best of our exclusive insight and analysis delivered straight to your inbox in a daily e-mail curated by our editors. Sign up for it and other newsletters on our newsletters and alerts page .