Trading Central’s North American Research desk analyzed 11 major S&P 500 index sectors looking for weak sectors that have seen improvements over the last 4 weeks. 2 sectors caught our interest. Utilities and Consumer Defensive. This week we scanned for the best TC Quantamental rated stocks in these 2 improving sectors which may be an early signal of the old adage "Sell in May and go away" starting to take place with the market turning defensive.
What does sell in May and Go away really mean?
It is a well-known saying in the trading world that is based on stocks’ historical lack luster performance starting in May and ending in September. Seasonal patterns used to be tied to agriculture however theories suggest the summer months of low volatility due to vacations and time away from the markets could be the main cause. Either way, a sector rotation could be a better option instead of running for the hills as some stocks perform quite well in a bearish market.
Here are the top rated U.S defensive stocks from a quantamental perspective.
Post Holdings, a consumer-packaged goods holding company that operates a variety of food businesses, has the highest TC Quantamental Rating on our list at 7.7 out of 10 which is very strong. The highest factor score is Growth at 8.8 out of 10 which is the highest among its peers in the Consumer Defensive sector. The growth factor takes into account the year over year change in price/earnings, EPS growth, and revenue growth. EPS growth increased 238% last quarter compared the same quarter a year ago.
TC Quantamental Rating suggests the stock price should be around $98 per share over the next 12 months based on overall price volatility and suggests a 12.7% upside potential since it was last rated in April.
Ingredion Inc., is global ingredients solutions provider that transforms corn, tapioca, potatoes, stevia, grains, fruits and vegetables into value-added ingredients and biomaterials for the food, beverage, brewing and other industries. The stock price is making new 52-week highs, outperforming the broad U.S. market. The stock has a TC Quantamental Rating of 6.8 out of 10 which is strong and has been trending higher since February 2022.The highest factor score is also Growth at 8.2 out of 10 which is among the highest in the Consumer Defensive sector.
TC Quantamental Rating suggests the stock price should be around $112 per share over the next 12 months based on overall price volatility and suggests a 6.6% upside potential since it was last rated in April.
NiSource, an energy holding company that operates in Gas and Electric segments, has a TC Quantamental Rating of 6.7 out of 10 which is strong and the highest in the Utilities sector. The stock also has a very strong Growth rating of 8.3 out of 10.
TC Quantamental Rating suggests the stock price should be around $29.8 per share over the next 12 months based on overall price volatility and suggests a 7% upside potential since it was last rated in April.
Lamb Weston Holdings Inc. a global producer, distributor, and marketer of value-added frozen potato products, has a strong 6.6 TC Quantamental Rating. Growth is also above average at 8.8 out of 10 which is tied with Post Holdings for the highest Growth factor score. The companies highest factor score is Momentum at 9.2 out of 10 which is the highest in the consumer defensive sector. The momentum factor refers to the tendency of winning stocks to continue performing well in the near term.
TC Quantamental Rating suggests the stock price should be near $116 per share over the next 12 months based on overall price volatility and suggests a 6.7% upside potential since it was last rated in April.
All the above stocks have strong growth ratings. Growth stocks have excelled during a recession according to Trading Central's Nowcasting macroeconomic indicator which identifies which stocks outperform or underperform based on all economic regimes.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
