Q1 Performance by Market Cap and Sector

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Includes: AABA, ADSK, AES, AET, AMBC, AMZN, ANTM, APOL, AYE, BIG, BSC, CELG, CFC, CIT, CMI, CMS, CSX, CTL, DF, EOG, ETN, EXPE, FNMA, GAS, GOOG, HAR, HCBK, HUM, IJH, IJR, IVV, IYZ, JBL, JEC, LEH, MBI, MDP, MRO, MTG, MWW, NBR, NOV, NUE, NVDA, PCP, PHM, PSA, R, RRC, S, SCG, SPY, STZ, SUN, SVU, TER, TXT, UNH, VLO, WAT, WDC, WMT, XL, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY
by: Alan Brochstein, CFA

Using data from Standard & Poors, I created the following table to help investors quickly see what worked and what didn’t work in March and in Q1 by sector and market capitalization. For March, deviations of 2% or greater are denoted by green or red (positive or negative relative performance of the sector vs. the index) and 5% or greater for the quarter.

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While the returns for the Russell indices by market cap were all very close, the S&P 600 stood out from the crowd, helped by a strong close to the quarter. Better performance in Energy, Financials (especially) and Technology compared to the S&P 500 drove the difference, overcoming particularly weak Healthcare.

As a quick but overly simplistic check, I used the S&P 600 sector weights on the S&P 500 returns and came up with the exact same -9.92% return. In other words, it appears that the better performance of the Small-Caps can be explained entirely by the composition of the index, though clearly there were some large deviations between the returns of those sectors that netted out.

Energy: For the month, large stocks continued to perform poorly, leaving the performance for the quarter significantly worse than that of smaller companies though ahead of the S&P 500. Standouts in the S&P 500 included EOG Resources (NYSE:EOG), Nabors Industries (NYSE:NBR) and Range Resources (NYSE:RRC) on the positive side and Tesoro (TSO), Valero Energy (NYSE:VLO), Sunoco (NYSE:SUN), Marathon Oil (NYSE:MRO) and National-Oilwell Varco (NYSE:NOV) on the downside.

Materials: The sector performed relatively well across market capitalizations, though Mid-Cap names had a tough March. In the S&P 500, Nucor (NYSE:NUE) was very strong, while Titanium Metals (TIE) was extremely weak.

Industrials: The sector also performed relatively well across market capitalizations, with the large companies enjoying a particularly strong March. Ryder System (NYSE:R) and CSX (NYSE:CSX) were the best performers in the S&P 500, while the largest decliners included Precision Castparts (NYSE:PCP), Cummins (NYSE:CMI), Cooper Industries (CBE), Monster Worldwide (NASDAQ:MNST), Textron (NYSE:TXT) and Jacobs Engineering (NYSE:JEC).

Consumer Discretionary: This sector tracked the overall market for the S&P 400 and S&P 600 components, with the larger companies providing slightly above-market returns. Big Lots (NYSE:BIG) and Pulte Homes (NYSE:PHM) were the big winners in the S&P 500, while the laggards included Apollo (NASDAQ:APOL), Harman International (NYSE:HAR), Meredith Corporation (NYSE:MDP) and Expedia (NASDAQ:EXPE).

Consumer Staples: The month of March was strong for the entire sector, leaving the names ahead of their respective benchmarks for the quarter, especially larger names. Wal-Mart (NYSE:WMT) was the best performer, while dogs included Constellation Brands (NYSE:STZ), Dean Foods (NYSE:DF), Supervalu (NYSE:SVU) and Whole Foods Market (WFMI).

Health Care: Below-index performance across all market capitalizations was somewhat surprising, with March in particular quite challenging for the sector. The smaller the capitalization, the worse the relative performance was. S&P 500 winners included Celgene (NASDAQ:CELG) and Zimmer Holdings (ZMH), while the biggest losers included WellPoint (WLP), Schering-Plough (SGP), UnitedHealth (NYSE:UNH), Humana (NYSE:HUM), Merck (NYSE:MRK), Coventry Health Care (CVH) (all insurance companies), and Waters Corporation (NYSE:WAT).

Financials: Performance was vastly different by market capitalization, with the starkest contrast in March. Small-Cap names performed almost 10% better than their larger peers. The steeper yield curve and the more conservative business practices pulled the babies out of the bath water. S&P 500 winners included Public Storage (NYSE:PSA) and Hudson City Bancorp (NASDAQ:HCBK), while the worst performers included Bear Stearns (NYSE:BSC), Ambac (ABK), MGIC Investment (NYSE:MTG), CIT Group (NYSE:CIT), Lehman Brothers (LEH), XL Capital (NYSE:XL), National City Corporation (NCC), Countrywide Financial (CFC), MBIA (NYSE:MBI) and Fannie Mae (FNM).

Technology: March performance was relatively strong, but the sector still was one of the worst performers during the quarter. Yahoo (YHOO) and Teradyne (NYSE:TER) were the sector’s best names in the S&P 500, while Motorola (MOT), NVIDIA (NASDAQ:NVDA), Jabil Circuit (NYSE:JBL), Google (NASDAQ:GOOG), Autodesk (NASDAQ:ADSK) and SanDisk (SNDK) were among the worst.

Telecommunication Services: This extremely small sector, especially outside of the S&P 500, had very strong performance. No stock stood out on the upside, while significant damage was done technically to Sprint (NYSE:S) and Qwest (Q).

Utilities: Despite the decline in Treasury rates, the sector performed below-average across all capitalizations despite some recovery in March. No stock stood out on the upside, while AES (NYSE:AES), CMS Energy (NYSE:CMS), Nicor (NYSE:GAS), and Allegheny (AYE) impacted the S&P 500 negatively.

Key Takeaways

  • Market Capitalization in general not a significant performance driver
  • Healthcare and Technology were very weak
  • Investors “cleaned up” with “dirty” economy (Energy, Materials, Industrials)
  • Stark performance differences within Financials signal investor interest???
  • Not surprisingly, then, “Value” beat “Growth”

Thrillers and Killers

  • 5 biggest winners: BIG, PHM, EOG, CELG, R
  • 5 biggest losers: BSC, ABK, MTG, CIT, WLP
  • Strongest Mega-Cap (Top 50): WMT
  • Weakest Mega-Cap: GOOG

Disclosure: Long TIE, WLP and ZMH