Themes From the New High List
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The new high and new low lists serve as important places to gather information about which trends and spaces are working and which are not. Looking over today's new high list, two themes become abundantly clear: dividends and domestic.
The list is dominated by high-yielding companies (nearly half of the companies yield more than 2.5%) and dividend payers in general (only a quarter of the companies on the list do not pay a dividend). Moreover, the average yield for the list is 2.48%, and the average yield excluding non-dividend payers is 3.4%.
The companies hitting new highs are also companies that derive large portions (in many cases all) of their revenue from the United States. Utilities, Telecom Services, Real Estate Investment Trusts, and Regional Banks are all over-represented on the list. These sectors and industries are almost solely exposed to the domestic economy.
What do these themes mean? The performance of high-yielding stocks exemplifies the reach for yield as bond yields remain anemic; the performance of domestic stocks shows the fear that money managers have toward Europe and emerging markets.
How one makes money from these themes depends on one's investing strategy. One could attempt to play the trend, buying high-yielders and domestic companies that have yet to move (it's a small list, but grocers like Kroger (NYSE: KR) or SuperValu (NYSE: SVU) meet the criteria) or by buying the companies on the new high list on dips. On the other hand, one could deem the move overdone and look to buy the non-dividend or foreign stocks that have been left for dead. For example Deckers Outdoor (NASDAQ: DECK) is well off of its high of $118.90, trading around 15 times forward earnings, and it continues to grow earnings at an impressive clip. Vale (NYSE: VALE), the Brazilian minerals company, should trade higher if sentiment toward emerging markets changes, and it is hardly expensive trading with a forward p/e of 6. Lastly, one could take a look at Siemens (NYSE: SI), a global technology play, whose stock has been a casualty of the Eurozone debacle. The stock is yielding over 4%, trades at less than 10 times forward earnings, and is positioned for strong growth save a severe global economic downturn.
I do not have a position in any of the companies mentioned in this entry.