Paper Profits & the Right Chemistry

Industry Rank Analysis 12-16-09

In evaluating the Zacks Industry Ranks, you want to see two things -- a good overall score (low, meaning more Zacks Rank #1 and 2 stocks than #4 or 5 ranked stocks) and some improvement the relative position from the prior week.

One industry that looks promising right now based on the Zacks Rank is Paper. It is currently in 18th place overall out of 205 industries ranked, and it climbed five spots this week. The average Zacks rank for the group is 2.35. With a total of 17 firms in the group, that is a very impressive average. Normally, the bigger the group in terms of the number of companies, the more the group average will be close to 3.00 (hence the sectors shown below all range between 2.73 and 3.21).

The closely related Wood Products industry does not fare quite as well, sitting in 43rd place with a 2.67 average rank, but it is coming up quickly, gaining 65 spots in the last week. The lumberjacks are OK (cue the "Monty Python" music).

Some of the firms of note in those groups that have earned the coveted Zacks Rank #1 are: Clearwater Paper (CLW - Snapshot Report), Neenah Paper (NP - Snapshot Report) and Universal Forest Products (UFPI - Analyst Report). All three of those are small caps. Investors looking for a larger name might consider #2 ranked International Paper (IP - Analyst Report).

The Chemical industry, broadly speaking, is also showing some strength. There are several sub-industries that we track. The strongest of these was Chemical-Plastics, which was in 9th place, up 32 spots in a week with a 2.50 average rank. It is a small industry with small-cap firms in it.

The big boys of the industry are not doing all that bad, either. The Diversified Chemicals, which is where you find most of the big, well-known firms, came in in 41st place, up four spots with an average rank of 2.65. The Specialty Chemical industry was right on its heels in 42nd place, up 3 spots on the week with an average rank of 2.66. Some of the bigger-cap names with Zacks Rank #1 ratings from those two groups include Dow Chemical (DOW - Analyst Report), Solutia (SOA - Snapshot Report) and W.R. Grace (GRA - Snapshot Report).

Both the Paper and Chemical industries are very sensitive to the overall level of economic activity. Their strong ranks are more evidence that the economy is coming back.

Sector	"This Week's Zacks Rank "	"2 Weeks ago Zacks Rank "	"FY09 Revisions Ratio "	"FY09 Estimates Revised Up "	"FY09 Estimates Revised Down "	"FY10 Revisions Ratio "
Consumer Staples	2.73	2.75	2.95	189	64	3.27
Retail-Wholesale	2.79	2.76	2.06	606	294	1.91
Auto-Tires-Trucks	2.83	2.81	2.75	33	12	1.88
Conglomerates	2.84	2.77	2.2	11	5	3.13
Business Services	2.86	2.9	1.42	44	31	1.13
Computer and Technology	2.88	2.88	2.26	553	245	1.94
Basic Materials	2.89	2.94	1.4	118	84	2.18
Industrial Products	2.94	2.95	1.59	102	64	2
Consumer Discretionary	2.98	2.97	1.49	128	86	1.44
Medical	3.02	3.02	1.89	233	123	1.24
Utilities	3.03	3.02	0.73	49	67	0.83
Oils-Energy	3.04	3.02	1.08	320	295	1.33
Construction	3.06	3.05	0.61	47	77	0.97
Finance	3.16	3.16	0.94	294	312	0.92
Aerospace	3.18	3.23	0.81	21	26	1.05
Transportation	3.21	3.2	1.28	101	79	1.12

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

Read the full analyst report on IP

Read the full analyst report on GRA

Read the full analyst report on DOW

Read the full analyst report on CLW

Read the full analyst report on NP