08/16/2017

2017 Mid-Year Recap

As the halfway point of 2017 approaches, we will take a look at which sectors and stocks have set the pace for the S&P 500 index so far this year. For the index as a whole, 2017 is off to a great start, up just over 8% as of the close on June 12th. Nothing seems to be able to stop or even slow this incredibly resilient bull market. It has continued chugging along in the face of Fed rate hikes, uncertainty over who would become POTUS, foreign acts of terrorism and other geopolitical events that would normally put a strain on the U.S. markets.

In a few weeks we will examine the overall valuation of the S&P 500 and whether we think the market is under/overvalued. Today we will focus on the stocks and sectors that have delivered the best returns so far this year, identify a few individual stocks from the top/bottom 25 companies (total return YTD) that we like going forward.

Starting with a look at sector returns, it is no surprise that even after the most recent dip, the Technology sector continues to dominate headlines and returns. Healthcare, Transportation and Basic Materials also produced very strong returns while the Energy & Extraction sector is the only loser.

S&P 500 Sector Returns – 2017 YTD

When you look at the 25 companies that have delivered the highest total returns YTD its not a shocker that the top 25 is dominated by Tech and Health companies (15 of the 25) as those sectors have performed so well YTD. Of the top returners, we have identified 2 companies (highlighted green) that earn an attractive AFG Investment Grade and 2 companies that grade poorly per AFG’s Investment Grade model (highlighted red).

Top 25 – 2017 Return YTD

The list of bottom 25 companies (total return YTD) is littered with Energy companies and a few of the retail/consumer stocks that have been taken a beating both in the headlines and in returns so far in 2017. Utilizing AFG Investment Grade model we have identified a few potential turnaround candidates amongst the biggest losers (highlighted green) and a few companies that look likely to have continued struggles (highlighted red).

Bottom 25 – 2017 Return YTD

 

AFG Investment Grade

AFG’s Investment Grade model is heavily utilized in our selection of stocks and stock idea generation. The Investment Grade model couples AFG’s Valuation metric with proprietary Quality and Momentum factors into a dynamic weighted model that has a track record of adding alpha to stock portfolios and outperforming its benchmarks. A letter grade of A-F is assigned to every company in the AFG universe based on rankings within each category and each factors weighting at the time. The weightings can be adjusted monthly to take advantage of times when certain factors are driving market returns to add as much alpha to portfolios as possible.

So far in 2017, AFG’s Investment Grade model has done well with our A Graded companies outperforming the market (S&P 500) by nearly 2% while F Graded firms have underperformed the market by over 4% YTD.

AFG Investment Grade – Return Spread vs. S&P 500