Comparing Average Valuations and Technical Indicators to Find Strong Stocks

by: Trade Radar Operator
It is often said that investors can reduce risk by picking stocks that are in the strongest industry sectors. I just rolled out the new Industry Inspector at and have been poking through the data, seeing what industries are showing strength and trying to identify whether there is still value there.
Within each market sector (there are 12 of them) there are multiple industries for a total of 209 industries. The Industry Inspector allows you to screen for those industries that are under-valued or that are over-valued. It also allows you to screen for those industries that are in up-trends or down-trends, or are above or below various moving averages. In other words, you can combine fundamentals and technicals when screening for industries. You can also just click on column headings to sort the data.
Today I ran a screen that looked for those industries that are in up-trends according to our proprietary Trend Performance Score, but are still showing some value according to Price-to-Sales ratio. In particular, I looked for Average Trend Performance Score greater than 3 and Average Price-to-Sales less than 2.
Within these industries, there is one -- Hospital and Medical Service Plans, in the healthcare sector -- that looks the most interesting. Nearly all of the 13 stocks in this category have strong technical indicators and appear to be solid momentum plays. In addition, average valuation for the industry is quite reasonable. Average Price-to-Sales is only 0.46, which is quite low and is definitely in value territory. The Average PE places the industry in the lower 25% of the 209 industries that are tracked. Again, this is at the value end of the range. Finally, Average ROE places this industry pretty close to the top.
The complete results for the screen described above are as follows:



Consumer Non-Durables

Food Chains

Consumer Services

Electronics Distribution

Health Care

Hospital And Medical Service Plans

Health Care

Other Pharmaceuticals


Home Furnishings

It is well-known that healthcare in general has been in a bullish upswing over the last few months as investors have focused on defensive sectors. This screen shows that with valuations still modest in the Hospital and Medical Service Plans industry, there remains room for the bullish trend to continue.

I’ll leave it to the reader to do the research on the individual stocks in this industry. They are as follows:

  • AET, Aetna Inc.
  • AGP, AMERIGROUP Corporation
  • CI, CIGNA Corporation
  • CNC, Centene Corporation
  • CVH, Coventry Health Care, Inc.
  • HNT, Health Net Inc.
  • HS, Healthspring, Inc.
  • HUM, Humana Inc.
  • MOH, Molina Healthcare Inc
  • UAM, Universal American Corp.
  • UNH, UnitedHealth Group Incorporated
  • WCG, WellCare Helath Plans, Inc.
  • WLP, WellPoint Inc.

Let us know if one of these stocks is one of your favorites or, on the other hand, whether you think they should be avoided.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.