Leading and Lagging Dow Jones Industries

Each week, Barron's publishes the Dow Jones Market Laboratory containing a list of price changes for 100 industries. The chart below shows the 10 best performing (shaded green) and 10 worst performing industries (shaded red) on a YTD basis, along with some middle of the pack industries that draw our attention (shaded yellow).

The chart also provides the percent price change that would be required for each industry to move to the mid-point of its 52 week price range.

The simple average of the unweighted industry prices changes for YTD is -4.7%. The weighted average of all stocks in the U.S. market as measured by the performance of the Vanguard Total Market Index (VTI) is -8.51%.

Given all the pain and anguish over banks in recent months, it is interesting to note that their decline on a YTD basis is somewhat middle of the road among the 100 industries, and has a return between the average of the industries and the total market return. That is probably an encouraging sign in the face of the more panic oriented statements and sentiment around banking.

We warned on banks last year, and suggested after the fourth quarter of 2007, and perhaps the first quarter of 2008, banks might become attractive again. Banks are beginning to show relative strength.

We also warned all last year about equity REITS. They too are showing encouraging relative performance.

Banks and REITs each have a solid gain potential to reach the mid-point of their 52-week price range as well. Integrated oils, on the other hand, would have to decline over 6% to reach their 52-week price range mid-point. There is nothing sacred about a mid-point, but it’s one interesting factoid to process when thinking about risk and reward potential.

Integrated oil and gas is a real disappointment in terms of response to $103 oil. Clearly, the market does not expect oil company profits to move anything like parallel to the price of the commodity — or maybe it does, by not believing in the sustainability of current oil price levels.

Home construction is bucking the trend and the sentiment as the third best industry YTD.

Travel and tourism is no surprise as a loser, given the impact of the miserable performance of the the U.S. Dollar on foreign travel, the high cost of driving domestically and probable reduction in discretionary spending during the currrent malaise.