11.30.14: Sector returns for 2014

Since so much of our earnings work is sector-related, here is a quick recap of sector returns for November ’14, both from the SP 500 perspective and the SPDR perspective:

(The first column is the SP 500 sector return per the Wall Street Journal’s Saturday, 11/29/14 edition, while the 2nd column is the return of the SPDR sector ETF):

Consumer Staples: +5.3%, +6.71%

Consumer Discretionary: +5.3%, +6.86%

Technology: +5%, +6.68%

Health Care: +3.2%, +5.85%

Industrials: +2.8%, +4.15%

Financials: +2.1%, +4.36%

Basic Materials: +1.2%, +2.97%

Telco: +1.1%, +2.64%

Utilities: +0.7%, +2.82%

Energy: -8.8%, -6.87%

SP 500: +4.42%, +4.43%

(Sources: the Wall Street Journal (WSJ) credits Factset as their source, while my source for the SPRD sector ETF returns was ycharts.com.)

Personally, I’ve been wanting to do this for a while, i.e. comparing some of the ETF’s to the actual SP 500 sector returns for given periods. If readers just held the SPDR sector ETF’s in the same weights as that sector sports within the SP 500, you’d have done substantially better than the SP 500 or a normal index fund. For example, within the XLK or Technology ETF, AAPL’s weight is 17%, while AAPL’s weight within the SP 500 is roughly 3.5%. Naturally AAPL’s heavier weighting in the XLK ETF could account for the 168 basis points in extra return for the SPDR ETF, since AAPL was up 11.9% in the month of November ’14 alone.

The SPDR ETF’s even offered better risk – reward in the losing sector Energy, no doubt given Exxon and Chevron’s weights, which are 30% of the market cap of the XLE combined. Exxon (XOM) was down 4.11% in the month of November ’14 alone, which Chevron (CVX) fell 6.19%.

Please don’t misconstrue this blog post as an infomercial for the SPDR’s. I’ve always wondered how the sector ETF’s compare to sector returns of the ETF universe over time. It is something I’d like to spend more time analyzing. Anytime I can write about a  topic for readers, I come away learning more about it, and thinking further about our client strategy.

Here is how our top 5 holdings for clients did both in the month of November (first column), and YTD (2nd column):

Microsoft: +3.39%, +31.30%

Alcoa: +4.35%, +64.03%

Schwab: +4.76%, +9.92%

Wal-Mart: +14.66%, +13.40%

Whole Foods: +26.37%, -14.29%

SP 500: +4.42%, +13.98%

While Microsoft and Alcoa have lagged in q4 ’14, their YTD returns are very nice. In hindsight it was prudent to add to Whole Foods under $40 after the disastrous May ’14 quarter. Wal-Mart has been a core position for a while and is a huge beneficiary of the drop in gasoline prices.

The biggest change in the “Top 5” since the 3rd quarter end, was selling a good chunk of Facebook (FB). Clients still have a bout 60% – 65% of the original position, but there is no question the stock has stopped making new highs as the SP 500 has marched higher this year and through the 4th quarter.

Thanks for reading.

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager



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