Zero degree banaloma: 2013 could be a difficult year for savers. In fact, months are not calm. Sure, the financial climate has improved compared to a year ago, but the Eurozone crisis and the problem of Fiscal Cliff will still constitute the main risk factors perceived on the financial markets. Not to mention the difficult economic situation, especially in Europe. Since these problems cannot be solved overnight, it would not really be surprising if the first part of 2013 was characterized by large fluctuations but, overall, little directionality (it grows a lot, then it decreases a lot).
Le stock valuations around the world they are on average quite good, with price/earnings ratios in many cases still low and good dividends (especially when compared to the yield on the bonds of countries considered more "safe"). Why not try to invest intelligently in equity sectors? Of course, a fair propensity for risk is needed, but certainly we are not talking about investing all of one's savings, but only a small portion.
At this point it serves some tools to navigate between sectors. I will use the same type of approach that I used in this post on equity investments in various countries, which I invite you to read, because in this way I avoid going too far into the methodological explanation. In short, let's consider the ten sectors worldwide (according to the classification GICS di Msci) to we analyze them as a function of two super-classical quantities:
- le assessments, i.e. the market value compared to the fundamentals, summarized by the aggregate price/earnings ratio (also known as "Price/Earnings" or P/E, which we calculate following the method of the legendary Graham & Dodd, trying to "clean up" the data the economic cycle, as well as taking into account the structural differences between sectors);
- the "momentum”, that is to say the momentum of the market, its inertial force, represented by historical performances over 12 months.
As I will never tire of repeating, a vast series of empirical evidence shows that on average (not always, it is clear) "value" investments, those with good fundamentals with respect to price, perform better than others in the medium-long term. Similar evidence exists for businesses with good performance in the recent past, i.e. with positive "momentum".
In my view, i more attractive stock sectors are those of the upper left quadrant, ie Healthcare (Healthcare), Consumer Staples (basic goods), Industrials e Technology : they "cost" relatively little and have a good "momentum", which basically means that there is a buying trend. Since the operators are in aggregate a bit "sheep" and tend to imitate the others, this is positive ...
For those who feel like taking a risk, then there are the sectors of the lower left quadrant. They are the ones with little "momentum" that is, roughly speaking, most in disgrace, but which present the best evaluations. It is not surprising to find in this dial, in addition to Telecommunications, sectors such as Materials e Energyparticularly sensitive to economic growth.
In the worst quadrant, the one at the bottom right, we find instead only the sector of Utilities (Public Services), relatively expensive and with very little "momentum". Finally, in the sector of dear but “trendy” are Financials (dominated by the big world banks, especially the USA) e Consumer Staples.
Before closing, let me reinforce a concept: it is about relative assessments across sectors, but all of which are quite convenient, because according to this "value/momentum" metric, the whole stock market is. For the technical details (I know the financial geeks among you will appreciate it), I refer you to a methodological document posted in AO People, the Advise Only Community, which is now accessible to everyone, just register for free.
Finally a invitation to readers: given that the world's sectors are well covered by ETFs listed on Borsa Italiana from various houses, all present in the Advise Only database, why not try to build your own investment portfolio that invests in sectors and then share it in the Community?
Everyone will be able to read the indications of the graph in his own way (which, I promise, we will reiterate on a quarterly basis), and will be able to assign the weights to the sectors in a personal way (for example, by equipping the preferred sectors, using the method of maximum risk diversification, or simply at random…).
Come on, we are waiting for you Community!
