This article series has been releasing every month since 2015 a dashboard with aggregate industry metrics in energy (most popular ETFs in this sector: XLE, XOP, VDE, IYE, FDN) and basic materials (most popular ETFs in this sector: XLB, IYM, VAW, GDX). It has been reshuffled this month with a new methodology to calculate more comprehensive Value and Quality Scores.
Shortcut
If you are used to this dashboard series or if you are short of time, you can skip the first paragraphs (metrics definition and table) and go to the charts. However, reading everything once is necessary if you want to use the metrics for stock picking purposes.
Base Metrics
We calculate the median value of five fundamental ratios for each industry: Earnings Yield ("EY"), Sales Yield ("SY"), Free Cash Flow Yield ("FY"), Return on Equity ("ROE"), Gross Margin ("GM"). Our usual calculation universe is about 3000 companies among the largest in the U.S. stock market. We adjust the lower capital limit in a few industries to get sets of more than 10 stocks and less than 100. The five base metrics are calculated on trailing 12 months. For all of them, higher is better and negative is bad. EY, SY and FY are medians of the inverse of Price/Earnings, Price/Sales and Price/Free Cash Flow. They are better for statistical studies than price-to-something ratios, which are unusable or non available when "something" is close to zero or negative. For example, companies with no or negative earnings can be taken into account. We use medians rather than averages as aggregate metrics for two reasons. First, medians are more robust to outliers and small sets. Second and most importantly, medians are more useful for stock picking. A median splits a set in two subsets of equal sizes: a good half and a bad half. An average is less relevant as a reference because it may be biased by a few extreme values. In the case of capital-weighted averages, it is also biased by the largest companies. Our
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