{"id":6799,"date":"2017-03-31T19:24:49","date_gmt":"2017-03-31T19:24:49","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6799"},"modified":"2017-03-31T19:24:49","modified_gmt":"2017-03-31T19:24:49","slug":"sp-500-weekly-earnings-update-still-overweight-energy-but-its-on-a-short-leash","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6799","title":{"rendered":"SP 500 Weekly Earnings Update: Still Overweight Energy, but It&#8217;s On a Short Leash"},"content":{"rendered":"<p>Technology was the clear winner in Q1 &#8217;17 according to this link from Ed Yardeni (dated 3\/30\/17)\u00a0<a href=\"https:\/\/fundamentalis.com\/?attachment_id=6801\" rel=\"attachment wp-att-6801\">YardeniSP500perf&#8217;17YTD33117<\/a>, with the SP up roughly 6% on the quarter. Financials were white hot after the election last November, while Tech remained punk through most of Q4 &#8217;16, so I suspect we saw some giveback or &#8220;reversion&#8221; in Q1 &#8217;17.<\/p>\n<p>For full-year 2016, here is how the main benchmarks returned:<\/p>\n<ul>\n<li>Russell 2000: +21%<\/li>\n<li>SP 500: +12%<\/li>\n<li>Nasdaq: +7%<\/li>\n<\/ul>\n<p>This is one of the reasons Tech remained &#8220;overweight&#8221; in client accounts coming into 2017, while the Russell 2000 was sold (and it wasn&#8217;t a big position anyway).<\/p>\n<p>A 24% annualized pace for the large-cap benchmark isn&#8217;t too shabby &#8211; let&#8217;s see if it can continue.<\/p>\n<p>Technology was up roughly 12% on the quarter, while the Energy sector fell 7%.<\/p>\n<p>Clients are currently overweight both sectors, along with Financials.<\/p>\n<p>With Technology, Financials, Health Care and Energy, readers can get roughly 65% of the SP 500 by market cap.<\/p>\n<p>The dividend and &#8220;safety&#8221; trades which we avoided for years for clients were mixed: Telco fell 5%, Utilities rose 5% and Real Estate was up 2%.<\/p>\n<p><em><strong>The Energy Sector<\/strong><\/em><\/p>\n<p>Let&#8217;s look at Energy quickly: fortunately the bearish sentiment has dissipated to some extent and with crude oil (WTI) struggling with $50 per barrel, the areas of focus are two fold over the next 30 days:<\/p>\n<p>1.) Can crude oil catch a bid into the mid $50&#8217;s into the 2nd quarter ? (Investors don&#8217;t need a home run, just some slow persistent strength)<\/p>\n<p>2.) Can Energy sector earnings which start typically the 3rd week of April and will be mostly done by the first week of May, catalyze the sector against very weak comp&#8217;s in 2016 ?<\/p>\n<p>Those are the questions guiding my playbook for the sector over the next 4 &#8211; 5 weeks. Energy earnings LOOK strong based on profits being entirely wiped out in Q1 &#8217;16 thus the denominators are very small for y\/y growth for the sector.<\/p>\n<p>The Big Energy 4 usually report first: first Halliburton and Schlumberger, and then Exxon and Chevron. These 4 companies represent a big chunk of the &#8220;earnings weight&#8221; of the Energy sector.<\/p>\n<p><em><strong>Thomson Reuters data by the numbers:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-Quarter estimate:<\/strong><\/em> $130.98 vs last week&#8217;s $130.91<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 18(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 3(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.53%, and now between 5.51% and 5.55% for the last 6 weeks<\/li>\n<li><em><strong>Y\/Y growth rate of the forward estimate:<\/strong><\/em> fell to 6% y\/y growth, which will be explained in the next paragraph.<\/li>\n<\/ul>\n<p><em><strong>Analysis \/ conclusion: <\/strong><\/em>The y\/y growth rate fell 200 basis points, since the year-ago quarter incorporates the &#8220;quarterly bump&#8221; at the start of every quarter. next week the &#8220;forward 4-quarter estimate&#8221; will be around $134 after the quarterly bump, thus the y\/y growth rate will be an apples-to-apples comparison. (This is why the PEG ratio jumped from 2(x) to 3(x), since forward growth slowed to 6%, on an 18(x) P.E. next week the PEG shoudl look &#8220;more normal&#8221; and year-over-year growth could be at 9% or more.<\/p>\n<p>I think SP 500 earnings are in sweet spot here: Technology is strong, even semiconductors are flush, and that sector is like trading your crazy uncle.<\/p>\n<p>Look for more posts over the weekend. A lot to cover with earnings by sector.<\/p>\n<p>Thanks for reading.<\/p>\n<p><em><strong>\u00a0<\/strong><\/em><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Technology was the clear winner in Q1 &#8217;17 according to this link from Ed Yardeni (dated 3\/30\/17)\u00a0YardeniSP500perf&#8217;17YTD33117, with the SP&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[171,95,91],"tags":[],"class_list":["post-6799","post","type-post","status-publish","format-standard","hentry","category-energy-etfs-xle","category-energy-sector","category-weekly-earnings-update"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6799","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6799"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6799\/revisions"}],"predecessor-version":[{"id":6804,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6799\/revisions\/6804"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6799"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6799"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6799"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}