Disclaimer

A previous post noted the poor performance of the Materials and Energy Sectors in 2015, secondary to the falls in commodity prices, particularly of iron ore, and crude oil. This post looks at how the Industrial Sector performed in 2015. Any comments should not be considered as financial advice, but rather technical analysis observations. Readers should always consult their own financial adviser(s) about their intended investments.

The Ten Basic Sectors

Since 2002 the ASX has in association with the ratings agency Standard & Poors created Indices for 10 basic sectors to help investors in their analysis of the market. They are: Consumer Discretionary, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Consumer Staples, Telecommunication, and Utilities.

S&P/ASX 200 Industrials Index (XNJ)

The ASX website provides the following information about the Industrial Sector:

The S&P/ASX 200 Industrials Index (XNJ) includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; or, the provision of commercial services and supplies, including printing, employment, environmental and office services; or, the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure. From <http://www.asx.com.au/products/sector-indices.htm#industrials_index

Stocks In the XNJ (Industrial Sector Index)

Stocks are included in the relevant indices according to their market capitalization. The larger stocks have a larger influence on the indices which may not always be representative the whole.

There are twenty seven ASX 200 Stocks included in this Index. The actual list is interesting. I’m not familiar with them all, but they are all top 200 stocks, and potentially solid performers:

1.  AIO – Asciano
2.  ALQ – ALS Ltd
3.  ASB – Austal Ltd
4.  AZJ – Aurizon Holdings
5.  BRS – Broad Spectrum
6. BXB – Brambles
7.  CAB –  Cabcharge
8.  CCP – Credit Corp
9.  CDD – Cardno
10. CIM – Cimic Group
11.  DOW – Downer
12. GWA – GWA Group
13.  MIN – Mineral Resources
14.  MMS – McMillan Shakespeare
15.  MND – Monadelphous
16.  MQA – Macq Atlas Group
17.  QAN – Qantas
18.  QUB – Qube Holdings
19.  REC – Recall Holdings
20.  SAI – SAI Holdings
21.  SEK – Seek Ltd
22. SPO – Spotless Group
23.  SVW – Seven Group
24.  SYD – Sydney Airport
25.  TCL – Transurban
26.  TPI – Transpacific
27.  V ED – Veda Group

Chart Review

This is a daily chart, covering the last 12 months, for the XNJ

Observations

• The Industrial Index has risen over the last twelve months from 4129.1 to the last close at 4764.4, a 15.3% gain.
• The range from low to high was 1915.2 points or 46% higher than the low.
• Despite the mid-year pull-back, the primary trend for the year was upwards, and remains intact
• The early year resistance level at 4400 points, after being penetrated, has become a support level for the latter half of the year.

Discussion

Professional Investors with millions of dollars of public money to invest, commonly undertake detailed sectoral research to better focus their attentions on the more profitable segments of the market.

As a retail investor I have tended to piggy-back my selections on the recommendations of my stock-brokers, and more recently on reviews by fellow investors on trader community websites such as “Ten Bags Full”.  Since completing two courses in technical analysis, however, I have used TA to find suitable stocks for myself  with some success, but I have not myself tried in a systematic way, to use this “top-down” approach.

One of my perceived difficulties is that it sets another level of uncertainty inasmuch as the “dogs” of one year may be the winners the next, and vice-versa. Since each stock within a sector has a different profile, it is still necessary to eyeball charts independently, to find those most likely to out-perform.

Categories: Chart Review, Investment

Tags: Sectoral Analysis, Standard and Poors