Market Insights

After October’s volatility, investors seemed to be playing it safe.

Big and “boring” stocks are among the top performers in the last month.  Most of them are consumer facing rather than dynamic innovators. We’re talking Gillette razors, big-box retail and Egg McMuffins. Tobacco’s even making a comeback. Fancy tech stocks are nowhere to be seen. (All these moves came before yesterday’s mid-term elections.)

RadarScreen® with the best-performing large S&P 500 members in the last month. (All values as of Tuesday’s close.)

This RadarScreen® illustrates the point with a couple of simple custom indicators. Here’s what it shows:

1. I imported all the members of the S&P 500 and added the column for Market Capitalization.
2. I then sorted on Market Capitalization and erased all the stocks under $100 billion. Now we’re only looking at the largest names.
3. I added a custom indicator showing the change over the last 21 trading sessions. This is essentially the monthly return.
4. Another custom indicator shows where the stock closed yesterday relative to its range over those 21 sessions. Green values close to 100% mean the stock is pushing its highs over the last month, and red values mean the opposite.

Notice how the strongest performers are large “safety plays” like Procter & Gamble (PG), Wal-Mart Stores (WMT) and McDonald’s (MCD). Notice how the laggards are mostly “growth” stocks — including many technology names: Nvidia (NVDA), Amazon.com (AMZN) and Apple (AAPL).

RadarScreen® with the worst-performing large S&P 500 members in the last month.

This is a classic example of the recent sentiment shift away from large-cap growth toward value stocks. But more than mere emotions might be at work because many of these “boring” names reported strong numbers last earnings season.

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PG, for example, beat on the top and bottom lines thanks to higher diaper prices and strong demand for its Olay beauty products. WMT, one of our “Four Horsemen of the Retail Post-Apocalypse,” is emerging as a powerhouse of the new digital economy.

Comcast (CMCSA) had strong broadband subscribers (at least they weren’t dial-up modems). Coca-Cola (KO) had surprisingly positive growth in soft-drink volumes and Philip Morris (PM) benefited from higher cigarette prices. Not rampant growth stories, but better than an area like semiconductors, where pricing has gotten squeezed.

McDonald’s (MCD) chart showing golden cross on the Golden Arches.

Interestingly, the 50-day moving averages on many of these “boring” stocks recently crossed above their 200-day moving averages. Those kinds of “golden crosses” are often viewed as a sign of momentum turning more bullish.

In conclusion, traditional growth stocks have faced waves of selling. But investors seem to be shifting to some duller parts of the market.

Disclosure: This post is for educational purposes only and shouldn’t be interpreted as a trade recommendation.