Examination of the FirstCall mean 12-month target price changes for stocks in the S&P 500, S&P 1500 Dividend Aristocrats, Dow Jones US Equity REITs and the Alerian Infrastructure MLP indexes, shows that analysts least favor financials and MLPs in the year ahead.
We looked up the mean FirstCall target price for each constituent company in each of theses indexes, converted that to a price change and multiplied it by the weight of each constituent in each index to arrive at the effective mean analyst projection for each index.
These are the indexes and representative ETFs:
|XLG||Russell MegaCap 50|
|SPHQ||S&P 500 HQ|
|SPLV||S&P 500 LV|
|SDY||S&P 1500 HY Div Aristocrats|
|XLB||S&P 500 Basic Materials|
|XLE||S&P 500 Energy|
|XLF||S&P 500 Financials|
|XLI||S&P 500 Industrials|
|XLK||S&P 500 InfoTech & Telecomm|
|XLP||S&P 500 Consumer Staples|
|XLY||S&P 500 Consumer Cyclicals|
|XLU||S&P 500 Utilities|
|XLV||S&P 500 Healthcare|
|IYR||DJ US REITs|
|AMLP||Alerian InfraStructure MLPs|
MLPs are actually projected to go down in price, and financials are not expected to advance much.
Energy is most favored.
Utilities stand out as favored, but they did not do well in the recent fear of reduced Fed easing. They have the strongest short-term technical sell rating from Barchart.com and one of the stronger mean analyst views. That combination gives us significant pause.
The high quality, low volatility and strong dividend indexes are not projected to as well as the broader market. That will probably be true if the economy continues to improve, and untrue if the economy falters or sputters.
We don't think the absolute level of price projection is as interesting as the relative ranking of the various indexes. The absolute levels are probably less reliable that the relative rankings, and both could be way off, but there it is -- that is what the "Street" thinks.
Disclosure: QVM has positions in SPY and SDY as of the creation date of this article (September 30, 2013). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.
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