We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
These Stocks Are Showing Relative Strength as S&P 500 Stalls Near Record High
Read MoreHide Full Article
U.S. markets have been stuck in stall mode to kick off the New Year, taking a breather following last year’s historic rally. It looks like we’ll have to wait a bit longer to see the S&P 500 clinch a new all-time high after sellers have stepped in repeatedly through the first two weeks. By my count, twice last week we hit the (closing) high from early 2022 on an intraday basis, but failed to close above the coveted threshold. This could be a temporary sign of exhaustion; buying pressure in the general area appears to be waning for the time being.
Still, from a longer-term perspective, we remain in an established uptrend. Technology (in particular semiconductor stocks) showed relative strength in 2023, buoyed by a powerful artificial intelligence theme. The concept of relative strength is simple; the measure is used to determine which security has shown the best performance over a period of time.
Sector Performance Year-to-Date
For example, we can rank the S&P sectors by relative strength through the first two weeks of this year:
Image Source: Zacks Investment Research
With every year comes a different market theme. The sectors that have shown the strongest trend year-to-date include health care and communication services, while the energy and materials sectors have lagged. This sector performance is somewhat of a mixed bag in my view, as both defensive and aggressive pockets of the market are near the top. It’s still quite early as we remain in the first inning of a twelve inning stretch.
Of course, there’s no guarantee that this performance will continue into the future. One of the shortcomings of using relative strength (or any technical indicator for that matter) is that it relies on the past; it can’t predict the future. Yet history has shown that trends tend to persist longer than most investors expect. Those who studied physics remember that an object in motion tends to stay in motion.
As investors, our job isn’t to predict an unknowable future. Our job is to position our portfolios in the direction that stocks are most likely to go. No one can consistently predict tops and bottoms of every move, but we can take advantage of major trends and allow our investing capital to compound over time. That’s what it’s all about.
This approach relies on having an intermediate or long-term time horizon. Investing isn’t a game where one approach is optimal; many different strategies can be successful. But for most investors, having a longer-term outlook can help to look past temporary volatility.
Individual Outperformers
Within the leading health care sector, the large-cap pharmaceutical industry is also showing relative strength. Two stocks in particular from this space stand out and have been outperforming the major indices by a wide margin.
Eli Lilly (LLY - Free Report) discovers, develops, and markets human pharmaceuticals worldwide. The company’s array of products serves a vast number of therapeutic areas including diabetes, neuroscience, oncology and immunology, all of which are high growth areas that represent significant commercial potential. Eli Lilly boasts a dependable pipeline and is one of the world’s largest pharmaceutical companies.
Image Source: StockCharts
LLY stock has already risen an impressive 10.5% this year. Earnings for fiscal 2024 are expected to climb a staggering 91% relative to last year; analysts have increased their full-year EPS estimates by 0.64% in the past 60 days to $12.66/share.
Image Source: Zacks Investment Research
Similarly, Switzerland-based Novartis (NVS - Free Report) is a global manufacturer and provider of health care products. The company offers prescription medicines for patients and physicians, focusing on therapeutic areas such as cardiovascular, immunology, neuroscience, and oncology. Novartis boasts one of broadest portfolios of oncology drugs and generics, positioning itself as one of the top pharmaceutical companies.
Image Source: StockCharts
A Zacks Rank #2 (Buy), NVS stock appears to be breaking out and has already rallied nearly 7% this year. Analysts have bumped up their full-year EPS estimates by 1.54% in the past 60 days. The 2024 Zacks Consensus Estimate now stands at $7.23/share, reflecting a potential growth rate of 10.1% relative to last year.
Image Source: Zacks Investment Research
Final Thoughts
We can use relative strength to identify stocks that are outperforming within leading sectors and industry groups. These two top pharmaceutical stocks have shown relatively little volatility while rewarding shareholders with substantial gains.
As the S&P 500 continues to hover near all-time highs, make sure you’re taking advantage of all that Zacks has to offer as we make our way further into the New Year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
These Stocks Are Showing Relative Strength as S&P 500 Stalls Near Record High
U.S. markets have been stuck in stall mode to kick off the New Year, taking a breather following last year’s historic rally. It looks like we’ll have to wait a bit longer to see the S&P 500 clinch a new all-time high after sellers have stepped in repeatedly through the first two weeks. By my count, twice last week we hit the (closing) high from early 2022 on an intraday basis, but failed to close above the coveted threshold. This could be a temporary sign of exhaustion; buying pressure in the general area appears to be waning for the time being.
Still, from a longer-term perspective, we remain in an established uptrend. Technology (in particular semiconductor stocks) showed relative strength in 2023, buoyed by a powerful artificial intelligence theme. The concept of relative strength is simple; the measure is used to determine which security has shown the best performance over a period of time.
Sector Performance Year-to-Date
For example, we can rank the S&P sectors by relative strength through the first two weeks of this year:
Image Source: Zacks Investment Research
With every year comes a different market theme. The sectors that have shown the strongest trend year-to-date include health care and communication services, while the energy and materials sectors have lagged. This sector performance is somewhat of a mixed bag in my view, as both defensive and aggressive pockets of the market are near the top. It’s still quite early as we remain in the first inning of a twelve inning stretch.
Of course, there’s no guarantee that this performance will continue into the future. One of the shortcomings of using relative strength (or any technical indicator for that matter) is that it relies on the past; it can’t predict the future. Yet history has shown that trends tend to persist longer than most investors expect. Those who studied physics remember that an object in motion tends to stay in motion.
As investors, our job isn’t to predict an unknowable future. Our job is to position our portfolios in the direction that stocks are most likely to go. No one can consistently predict tops and bottoms of every move, but we can take advantage of major trends and allow our investing capital to compound over time. That’s what it’s all about.
This approach relies on having an intermediate or long-term time horizon. Investing isn’t a game where one approach is optimal; many different strategies can be successful. But for most investors, having a longer-term outlook can help to look past temporary volatility.
Individual Outperformers
Within the leading health care sector, the large-cap pharmaceutical industry is also showing relative strength. Two stocks in particular from this space stand out and have been outperforming the major indices by a wide margin.
Eli Lilly (LLY - Free Report) discovers, develops, and markets human pharmaceuticals worldwide. The company’s array of products serves a vast number of therapeutic areas including diabetes, neuroscience, oncology and immunology, all of which are high growth areas that represent significant commercial potential. Eli Lilly boasts a dependable pipeline and is one of the world’s largest pharmaceutical companies.
Image Source: StockCharts
LLY stock has already risen an impressive 10.5% this year. Earnings for fiscal 2024 are expected to climb a staggering 91% relative to last year; analysts have increased their full-year EPS estimates by 0.64% in the past 60 days to $12.66/share.
Image Source: Zacks Investment Research
Similarly, Switzerland-based Novartis (NVS - Free Report) is a global manufacturer and provider of health care products. The company offers prescription medicines for patients and physicians, focusing on therapeutic areas such as cardiovascular, immunology, neuroscience, and oncology. Novartis boasts one of broadest portfolios of oncology drugs and generics, positioning itself as one of the top pharmaceutical companies.
Image Source: StockCharts
A Zacks Rank #2 (Buy), NVS stock appears to be breaking out and has already rallied nearly 7% this year. Analysts have bumped up their full-year EPS estimates by 1.54% in the past 60 days. The 2024 Zacks Consensus Estimate now stands at $7.23/share, reflecting a potential growth rate of 10.1% relative to last year.
Image Source: Zacks Investment Research
Final Thoughts
We can use relative strength to identify stocks that are outperforming within leading sectors and industry groups. These two top pharmaceutical stocks have shown relatively little volatility while rewarding shareholders with substantial gains.
As the S&P 500 continues to hover near all-time highs, make sure you’re taking advantage of all that Zacks has to offer as we make our way further into the New Year.