The Return of the Living Dead

OK, Halloween is over, but some of the best-looking industries according to the Zacks Rank are those that not long ago were considered part of the living dead.

Case in point, is the top performing sector -- Auto-Truck-Tires. Out of 206 industries tracked, the sector has five of them, and the worst of the bunch, Foreign Autos, ranked tied for 89th with a composite score of 2.88. None of the groups were at the very top, but all were better than average.

The original equipment parts makers (although one could argue about the grouping of some of the names) scored best with a rank of 44 and a composite score of 2.62. Three of the 28 firms in the industry, Fuel System Solutions (FSYS - Snapshot Report), Oshkosh Truck (OSK - Snapshot Report) and Wabco Holdings (WBC - Snapshot Report), hold the coveted Zacks #1 Rank, while an additional 10 have #2 ranks.

While not part of the sector, the Auto Dealers (which are included in Retail) are tied for the 48th spot with the Domestic Automakers, both with composite ranks of 2.67. Among the dealers, CarMax (KMX - Analyst Report), Group 1 Auto (GPI - Snapshot Report) and Penske (PAG - Analyst Report) all hold #1 ranks, while Ford (F - Analyst Report) holds a #2 rank.

The Construction sector was also left for dead not that long ago, but it is tied for third place among the sectors. It is more of a mix by industry, but has some of the very strongest, including some very big surprises, including the Mobile Home/RV industry, which is tied for 3rd place in the rankings thanks to #1 ranks from Cavco (CVCO - Snapshot Report) and Thor (THO - Snapshot Report), both of which reported earnings that were more than twice as high as expected. Who is the RV industry tied with? Two other building related areas: Lighting Fixtures, led by LSI Industries (LYTS - Snapshot Report), and Paint, led by RPM International (RPM - Snapshot Report).

So what does this say about the economy? Mostly good things. It says that the stimulus is working and helping out some of the most depressed sectors. Also that these sorts of durable goods-type firms are among the ones seeing the greatest productivity gains (productivity in durable goods rose at over 20% in the third quarter), and those gains are translating into gains at the bottom line.

Over the long term, I have some doubts about the sustainability of such a move, given the need for the consumer to tighten their belts and save more. However, the bar got set extremely low and it was an easy hurdle to clear. Easy money and low interest rates mean that not only were they able to survive, at least for the short term -- they look like they will be able to thrive.

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