Chicago, IL – September 15, 2009- Kevin Matras goes over the new Top Sectors and how to use them in your own trading. Highlighted stocks in this week’s article include The Cheesecake Factory Inc. (NASDAQ: CAKE), PNM Resources, Inc. (NYSE: PNM), Diamond Foods, Inc. (NASDAQ: DMND), Brush Engineered Materials, Inc. (NYSE: BW), KBW, Inc. (NYSE: KBW) and 3M Company (NYSE: MMM). Click here for the full story exclusively on

Screen of the Week written by Kevin Matras of Zacks Investment Research:

Every few months, I like running this screen to find the new Top Sectors. And since roughly half of a stock’s price move can be directly attributed to its group, it’s important to stay on top of this.

By definition, a strong Sector or strong Industry will have more of its companies moving higher than a weak Sector or weak Industry.

If the majority of stocks are going down in an industry, it can’t be a strong industry. If more stocks are going up, it is a strong industry.

What’s interesting is that I’ve done some testing over the past and found that just getting into an average stock in a strong group will oftentimes outperform the best stocks in a troubled group.

This doesn’t mean you can just pick anything and make money. Far from it. But it illustrates how powerful the underlying group is to the success of your stock picking.

One of my favorite ways to find the top Sectors is to look at the percentage of stocks trading within 10% of their 52-week highs.

A lot of people like looking at the percentage price change over the last 12 or 24 weeks. That’s fine – but I don’t think its sensitive enough.

For example, take the Oil & Energy sector last year. If you looked at it based on its 24-week or 12-week price performance – it was continuously ranked one of the top Sectors; even while it was collapsing.

That was because the gains were so large in the first part of the 12- or 24-week period – even a large pullback over a span of many weeks can be lost within the larger run-up that preceded it.

But by checking their position in comparison to their 52-week highs, a simple 10% pullback from their 52-week highs will show up. And if more and more companies within that group are pulling back from their highs by more than 10%, it’ll be reflected in that Sector’s rating and alert the investor that something systemic might be happening to that group as a whole rather than something that’s just stock specific.

And like I said at the beginning, since roughly half of a stock’s price performance can be directly attributed to the group that it’s in, it is important to be able to identify the best Sectors quickly and accurately.

So what are the current top Sectors? Glad you asked.

The top five Sectors based on the percentage of stocks at or within 10% of their 52-week highs are:


  1. Retail-Wholesale — 32.2%
  2. Utilities — 30.3%
  3. Consumer Staples — 29.5%
  4. Basic Materials — 29.3%
  5. Finance — 28.6%


  6. Conglomerates — 27.5%
    (extra one for those who are not interested in Financials)


Retail-Wholesale is still number one from the last time I ran this in April. But back then only 14% of the companies were trading within 10% of their 52-week high. This time, it is 32%.

There are also some new sectors that appear on this list, such as Utilities, Basic Materials and Conglomerates. I especially like to look at the new groups that pop up.

Here are a few stocks from each of those current top sectors (for Tuesday, 9/15/09):

CAKE The Cheesecake Factory Inc. – Retail-Wholesale
PNM PNM Resources, Inc. – Utilities
DMND Diamond Foods, Inc. – Consumer Staples
BW Brush Engineered Materials, Inc. – Basic Materials
KBW KBW, Inc. – Finance
MMM 3M Company – Conglomerates

All of these stocks are in the top Sectors as we’ve defined them, and they are all on the move.

Start picking stocks in the best Sectors and Industries on your own today. It’s easy to do with the Research Wizard. Start putting the odds of success in your favor. Sign up for a free trial to the Research Wizard today:

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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