YWR: Global Factor Model
We stick with gold and Korea, but find 2 new trends nobody is talking about.
For anyone new, this is the day we go over all the estimate data and identify the top trends globally.
When you look at the top stocks for estimate momentum it’s flooded with gold miners, copper miners and memory stocks.
And the top 5 ranked industries are precious metals (gold + PGM’s), pharmaceuticals, other metals (copper), semiconductors and then regional banks.
These trends are strong, but not new.
We’ve been tracking the broadening out of the commodity trend from gold to PGM’s to aluminium to copper. We’ve been flagging the rise of memory stocks (Would you be interested in Nvidia on 7x earnings?) and Korea (Who am I ETF?)… and it’s been great.
But we will stick with them because we are reminded of the great words of John Burbank. “Investors always underestimate the strength and duration of a trend.”
And clawdbot makes the think the demand for compute and memory is going to be infinite.
Still, we should always be hunting for the fresh meat. That is the point of the factor model, to find trends nobody is talking about.
So here are two:
Trend nobody is talking about about #1: US Regional Banks
Anyone talking about the massive earnings upgrades going through on US regional banks?
On the YWR Tableau Dashboard there is a tab which shows estimate momentum by industry. It’s useful to check this and then click into the bars to see which companies are driving the scores.
At the industry level level Precious Metals, Chinese Brokers, and Chinese insurance companies are the best ranked, but then there are Regional Banks. Which is kind of surprising.
What’s going on there?
When you click into the data to see which companies are driving the industry score you see a long list of US regional banks with estimate scores in the 90’s. Estimate scores in the 90’s mean this is some of the strongest estimate revision momentum in the world.
Links to all the tools we use are at the bottom of the post.
Now take the YWR Retool App and check the EPS revision charts for each of them..Banc of California, Ally, First Horizon, Fifth Third..
It’s insane.
And look at the stock charts.. they haven’t really gone anywhere…
It’s an interesting set up. Estimates for US regional banks going up dramatically, and the stocks haven’t really reacted. Not much anyways.
I think the lack of share price response is because people don’t understand what’s going on. They don’t see the story. But you know the story. It’s what we’ve been anticipating in It’s Happening.
Look at the highlights from the Banc of California Q4.
15% annualised loan growth in the quarter.
Folks… there is a boom going on (Killer Boom Charts) and the banks are starting to lend again. The animal spirits are returning. Plus, deposit costs are moderating (due to lower rates) and credit quality is good.
Trend Nobody is Talking about #2: the Energy Complex
This group of highly cyclical, unowned and hated industries is showing an inflection point in forward earnings estimates.
‘Inflection points’ are situations where estimates were trending flat to down, but then sometime over the last year inflected upwards.
When we screen for how many companies in an industry are inflecting, (to make sure it’s not a company driven 1-off) we see Oil Refining, Contract Drilling, Integrated Oil, Oil and Gas Pipelines, and Oil and Gas Production.
If you want to work on individual stock ideas I built a spreadsheet with the 5 stocks showing the greatest estimate inflection for each industry. A link to the sheet is below with everything else.
It’s not a sector level trend, but at a company level I want to flag Kulicke & Soffa ($KLIC). They build the tools for packaging semiconductors. We learned from SK Hynix the importance of packaging. These memory chips are now getting stacked 16 high and that is a massive packaging challenge. It’s why SK Hynix is building a new $3bn packaging plant in Indiana. I put in a link to the YWR AI report on KLIC as well.
Country Level Trends
This pick up in estimate momentum in the US banks plus US oil services has strengthened the momentum of the US relative to the other countries.
These country scores flop around a lot, but it’s still interesting to note the consistent strength of the US.. and South Korea.
Below are the links to all your tools, plus the inflection stocks by industry sheet, and the AI report on Kulicke and Soffa.
So get your coffee going and please share in the comments or chat any insights you find.
