Seeking Alpha

The Top Big Caps To Buy Now

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Includes: ADBE, ADSK, AGN, AJG, ALGN, ALL, AMAT, AME, ARE, BRO, CDW, CHU, CMG, CNC, CR, CRL, CRM, CS, CSL, CTLT, CW, DHR, DPZ, DXCM, EPAM, ETN, EW, FISV, FTNT, GNTX, HAL, HES, HOLX, IGT, INFO, INTC, ITW, JAZZ, JBHT, JLL, JNJ, JWN, KLAC, KRP, KSU, LAZ, LEA, LMT, LRCX, LULU, MAR, MDT, MMC, MRK, MSG, NDAQ, NFLX, NKE, NOC, NOW, NTAP, NVR, NWL, ODFL, OSK, OTEX, PANW, PCAR, PH, PHM, PII, PNR, PVH, PXD, ROST, RTN, SHOP, SNAP, SPLK, STX, SWK, TDG, TER, TOL, TRN, TROW, UNH, UTX, V, WCG, WTR, WY, ZM
by: Limelight Alpha Management Partners
Limelight Alpha Management Partners
Long/short equity, Growth, medium-term horizon, registered investment advisor
Summary

The top big-cap sector is industrial goods.

The best sector is insurance brokers.

The highest-rated big caps this week include Centene, Newell Brands, and Polaris.

It was more of the same in the stock market last week in terms of returns, but the catalysts supporting the rally shifted from easing trade tensions and dovish Federal Reserve policy to a deescalating of tensions between the U.S. and Iran. Specifically, a tepid Iranian response to the U.S. strike that killed Iranian General Qassem Soleimani helped quash the prior week's rally in energy stocks (crude fell 6.2% on the week), emboldening investors to put risk on again (the Nasdaq's 2.3% weekly return more than doubled the S&P 500's 1.1% return).

The early-year strength so far is in keeping with seasonal trends we highlighted previously, but that doesn't mean the stock market has become entirely riskless. The percentage of stocks trading 5% or more above their 200-day moving average remains near the highest levels since the early 2018 peak, suggesting that investors should be sector, industry, and stock specific while also continuing to rein in the use of margin.

The best big cap sectors to buy

Every week, we screen over 1,600 widely-traded stocks through our methodology, a scoring system incorporating forward earnings growth, historical trends in reporting earnings that beat Wall Street estimates, insider buying, short-term and long-term institutional money flow, forward valuation relative to historical valuation, contra-trend short interest analysis, and quarterly seasonality over the past decade.

Then, we aggregate those individual scores by sector for insight into the best sectors to over- and under-weight in portfolios.

This week, the top-ranked large cap sectors are industrial goods (Raytheon (RTN), Weyerhaeuser (WY), TransDigm Group (TDG)), healthcare (Centene (CNC), Johnson & Johnson (JNJ), Align Technology (ALGN)), and services (Trinity Industries (TRN), Kansas City Southern (KSU), Domino's Pizza (DPZ)).

Meanwhile, technology and consumer goods are rated neutral, and basic materials, utilities, and REITs score below average.

The best big cap stocks to buy

Since stocks historically follow earnings over time, insiders only buy for one reason; money flow reflects institutional optimism or pessimism, and seasonal patterns often rhyme the highest-scoring large-cap stocks offer the best opportunity for upside, especially in top-rated sectors, zones, regions, and countries.

This week, the following are the best and worst scoring large cap stocks. Stocks making the biggest jump in score to join the best list this week include Lockheed Martin (LMT), Northrop Grumman (NOC), and Snap, Inc. (SNAP).

LG CAP

1/9/2020

4 Week MA

Company Name

Symbol

Sector

INDUSTRY

SCORE

SCORE

BEST

Centene Corp

(CNC)

HEALTHCARE

HEALTH CARE PLANS

110

112.5

Newell Brands

(NWL)

CONSUMER GOODS

HOUSEWARES & ACCESSORIES

110

101.25

Polaris Inc.

(PII)

CONSUMER GOODS

RECREATIONAL VEHICLES

110

112.5

PVH Corp.

(PVH)

CONSUMER GOODS

TEXTILES

110

100

Align Technology

(ALGN)

HEALTHCARE

MEDICAL APPLIANCES & EQUIPMENT

105

103.75

Salesforce.com

(CRM)

TECHNOLOGY

INTERNET SOFTWARE & SERVICES

105

103.75

Domino's Pizza Inc.

(DPZ)

SERVICES

FOOD WHOLESALE

105

103.75

Fiserv

(FISV)

TECHNOLOGY

BUSINESS SOFTWARE & SERVICES

105

101.25

Johnson & Johnson

(JNJ)

HEALTHCARE

DRUG MANUFACTURERS

105

107.5

Kansas City Southern

(KSU)

SERVICES

RAILROADS

105

96.25

Lazard Ltd.

(LAZ)

FINANCIALS

ASSET MANAGEMENT

105

105

Open Text

(OTEX)

TECHNOLOGY

INTERNET SOFTWARE & SERVICES

105

96.25

Raytheon

(RTN)

INDUSTRIAL GOODS

AEROSPACE/DEFENSE PRODUCTS & SERVICES

105

105

Trinity Industries Inc

(TRN)

SERVICES

RAILROADS

105

106.25

T. Rowe Price Group

(TROW)

FINANCIALS

ASSET MANAGEMENT

105

103.75

Adobe Systems

(ADBE)

TECHNOLOGY

APPLICATION SOFTWARE

100

98.75

Autodesk Inc.

(ADSK)

TECHNOLOGY

TECHNICAL & SYSTEM SOFTWARE

100

98.75

Allergan

(AGN)

HEALTHCARE

DRUGS-GENERIC

100

92.5

Allstate

(ALL)

FINANCIALS

PROPERTY & CASUALITY INSURANCE

100

92.5

AMETEK

(AME)

INDUSTRIAL GOODS

INDUSTRIAL ELECTRICAL EQUIPMENT

100

100

Alexandria Real Estate Equities

(ARE)

REITS

REITS

100

85

Chipotle Mexican Grill

(CMG)

SERVICES

RESTAURANTS

100

77.5

Crane

(CR)

CONGLOMERATES

CONGLOMERATES

100

98.75

Charles River Labs

(CRL)

HEALTHCARE

BIOTECHNOLOGY

100

90

Credit Suisse

(CS)

FINANCIALS

FOREIGN MONEY CENTER BANKS

100

83.75

Carlisle Cos.

(CSL)

CONSUMER GOODS

RUBBER & PLASTICS

100

103.75

Curtiss-Wright Corp.

(CW)

INDUSTRIAL GOODS

AEROSPACE/DEFENSE PRODUCTS & SERVICES

100

97.5

Danaher

(DHR)

CONGLOMERATES

CONGLOMERATES

100

98.75

DexCom

(DXCM)

HEALTHCARE

MEDICAL INSTRUMENTS & SUPPLIES

100

88.75

Eaton Corp.

(ETN)

INDUSTRIAL GOODS

INDUSTRIAL ELECTRICAL EQUIPMENT

100

98.75

Edwards Lifesciences

(EW)

HEALTHCARE

MEDICAL APPLIANCES & EQUIPMENT

100

88.75

Fortinet Inc.

(FTNT)

TECHNOLOGY

APPLICATION SOFTWARE

100

88.75

Gentix Corp.

(GNTX)

CONSUMER GOODS

AUTO PARTS

100

97.5

Halliburton

(HAL)

BASIC MATERIALS

OIL & GAS EQUIPMENT & SERVICES

100

98.75

Hess Corp.

(HES)

BASIC MATERIALS

OIL & GAS REFINING & MARKETING

100

77.5

Hologic Inc.

(HOLX)

HEALTHCARE

MEDICAL APPLIANCES & EQUIPMENT

100

97.5

IHS Markit Ltd.

(INFO)

SERVICES

BUSINESS SERVICES

100

88.75

Intel

(INTC)

TECHNOLOGY

SEMICONDUCTOR- BROAD LINE

100

100

Illinois Tool Works

(ITW)

INDUSTRIAL GOODS

DIVERSIFIED MACHINERY

100

100

Jazz Pharmaceuticals

(JAZZ)

HEALTHCARE

BIOTECHNOLOGY

100

86.25

J.B. Hunt

(JBHT)

SERVICES

TRUCKING

100

102.5

Jones Lang LaSalle Inc.

(JLL)

FINANCIALS

PROPERTY MANAGEMENT

100

100

Nordstrom Inc.

(JWN)

SERVICES

APPAREL STORES

100

95

Kellogg Company

(NYSE:K)

CONSUMER GOODS

PROCESSED & PACKAGED GOODS

100

102.5

Kimbell Royalty Partners LP

(KRP)

BASIC MATERIALS

OIL & GAS EXPLORATION & PRODUCTION

100

88.75

Lockheed Martin

(LMT)

INDUSTRIAL GOODS

AEROSPACE/DEFENSE PRODUCTS & SERVICES

100

80

Marriott International Inc.

(MAR)

SERVICES

LODGING

100

96.25

Medtronic

(MDT)

HEALTHCARE

MEDICAL APPLIANCES & EQUIPMENT

100

97.5

Marsh & McLennan

(MMC)

FINANCIALS

INSURANCE BROKERS

100

98.75

Merck

(MRK)

HEALTHCARE

DRUG MANUFACTURERS

100

88.75

Nasdaq Inc.

(NDAQ)

FINANCIALS

DIVERSIFIED INVESTMENTS

100

93.75

Netflix

(NFLX)

SERVICES

MUSIC & VIDEO STORES

100

91.25

Nike

(NKE)

CONSUMER GOODS

TEXTILES

100

100

Northrop Grumman

(NOC)

INDUSTRIAL GOODS

AEROSPACE/DEFENSE PRODUCTS & SERVICES

100

81.25

ServiceNow

(NOW)

TECHNOLOGY

INFORMATION TECHNOLOGY SERVICES

100

85

Old Dominion Freight Line Inc.

(ODFL)

SERVICES

TRUCKING

100

105

Palo Alto Networks

(PANW)

TECHNOLOGY

NETWORKING & COMMUNICATION DEVICES

100

92.5

PulteGroup

(PHM)

INDUSTRIAL GOODS

RESIDENTIAL CONSTRUCTION

100

87.5

Pioneer Natural Resources

(PXD)

BASIC MATERIALS

INDEPENDENT OIL & GAS

100

87.5

Ross Stores

(ROST)

SERVICES

APPAREL STORES

100

98.75

Shopify

(SHOP)

TECHNOLOGY

APPLICATION SOFTWARE

100

83.75

Snap, Inc.

(SNAP)

TECHNOLOGY

INTERNET SOFTWARE & SERVICES

100

71.25

Splunk

(SPLK)

TECHNOLOGY

APPLICATION SOFTWARE

100

90

Stanley Black & Decker

(SWK)

INDUSTRIAL GOODS

MACHINE TOOLS & ACCESSORIES

100

91.25

TransDigm Group Inc.

(TDG)

INDUSTRIAL GOODS

AEROSPACE/DEFENSE PRODUCTS & SERVICES

100

98.75

United Technologies

(UTX)

CONGLOMERATES

CONGLOMERATES

100

98.75

Visa Inc.

(V)

SERVICES

BUSINESS SERVICES

100

100

WellCare Health

(WCG)

HEALTHCARE

HEALTH CARE PLANS

100

102.5

Aqua America Inc

(WTR)

UTILITIES

WATER UTILITIES

100

96.25

Weyerhaeuser Co.

(WY)

INDUSTRIAL GOODS

LUMBER, WOOD PRODUCTION

100

102.5

WORST

China Unicom

(CHU)

TECHNOLOGY

WIRELESS COMMUNICATIONS

25

23.75

International Game Technology

(IGT)

TECHNOLOGY

DIVERSIFIED COMPUTER SYSTEMS

25

61.25

Zoom Video Communications

(ZM)

TECHNOLOGY

APPLICATION SOFTWARE

25

22.5

The best big cap industries to buy

Similar to our sector ranking, we also aggregate scores by industry to further help investors spot new ideas.

The best large cap industries this week are insurance brokers (Marsh & McLennan, Arthur J. Gallagher (AJG), Brown & Brown (BRO)), healthcare plans (Centene, WellCare, UnitedHealth Group (UNH)), residential construction (PulteGroup, Toll Brothers (TOL), NVR (NVR)), industrial electrical equipment (Eaton Corp. (ETN), AMETEK), and diversified entertainment (The Madison Square Garden Co. (MSG)).

Taking this one step further, we can identify top industries to target within each major sector:

  • No basics baskets score above average this week.
  • In consumer, concentrate on trucks (PACCAR (PCAR), Oshkosh (OSK)), auto parts (Gentex (GNTX), Lear (LEA)), and textiles (PVH Corp., Nike, Lululemon (LULU)).
  • Focus on insurance brokers, property managers (Jones Lang LaSalle), and asset managers (T. Rowe Price, Lazard) in financials.
  • Healthcare plans, generic drugs (Catalent (CTLT), and medical appliances Align Technology, Medtronic, Hologic) are ranked best in healthcare.
  • Residential construction, industrial electrical, and industrial equipment (Pentair (PNR), Parker-Hannifin (PH)) offer upside in industrial goods.
  • The strongest scoring services industries are diversified entertainment, railroads (Trinity Industries, Kansas City Southern), and trucking (Old Dominion, J.B. Hunt).
  • Information technology services (ServiceNow, EPAM Systems (EPAM), CDW Corp. (CDW)), data storage devices (Seagate (STX), NetApp (NTAP)), and semi equipment (Teradyne (TER), Lam Research (LRCX), KLA Corp. (KLAC), Applied Materials (AMAT)) are top-rated in technology.

Disclosure: I am/we are long ALGN, DXCM, NFLX, PVH, CRM, DPZ, ADBE, ADSK, HES, NKE, SHOP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.