Gavekal Capital: What Does The Average Stock Look Like?

Tuesday, November 12, 2013

What Does The Average Stock Look Like?

We find that it is useful at times to step back from individual stock analysis and compare sectors to understand what are the the dynamics going on in the stock market. When we look at sectors, we look at it from an "equal-weighted" basis rather than "market-cap" basis. There are of course pros and cons to both but one particular pro for equal-weighting is it eliminates the distortions that very large market-cap stocks have on aggregate numbers and allows you to understand what are the characteristics of the "average" stock in a sector.

Starting with performance, the average stock in the Consumer Discretionary sector has gained the most over the past year meanwhile the average stock in the Materials sector has gained the least.

The Financial sector has the largest beta of any sector. Not surprisingly, Utilities has the lowest. What may catch most investors off guard, is Health Care has the second lowest beta.

Over the next four years, analysts expect Energy stocks to have the highest sales and earnings growth. The average stock in the Energy sector has actually had the highest growth in sales over the past three years, but is in the middle of the pack when it comes to earnings growth.

Least-squared Growth - 3 Years

Least-squared Growth - 3 Years

Finally, from an intangible-adjusted perspective, Financials are trading at the richest valuations and Telecom at the cheapest.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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Disclosure

The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. An investor cannot invest directly in an index. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Gavekal has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Gavekal.
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