YWR: Global Factor Model
Look at the factor model results this month. The top 20 rated stocks in the world, stocks where earnings estimates are rising, valuations are attractive and price momentum is positive are all China and Shipping. Two things nobody owns.
YWR Global Top 20
In the latest Killer Charts slide deck we did a whole section on shipping and highlighted the various positives. It’s a mix of things. It’s strong demand for tankers, it’s record China car exports causing tightness for car carriers, it’s rising offshore drilling rates and also disruption in the Red Sea taking out container ship capacity.
A word on China: The biggest driver of a company’s YWR Factor score is earnings estimate revisions. The second biggest component is valuation and the final contributor is price momentum. The high number of Chinese companies at the top of the list means these companies show the highest positive estimate revision momentum in the world. These scores are built up from changes in estimates over the last 180 days. It’s not a short term thing. I point this out for the naysayers who say the rally this week has nothing behind it and will fall on its face.
Statistically, China look good. The companies are beating estimates (because analysts got to negative), and the valuations are some of the lowest in the world. When the government announced this week its plans to stimulate the stock market it was fuel on the fire. The rise in prices will have some negative effect on the value score, but will improve the price momentum factor. Overall, I expect China’s rankings to improve in next month’s data.
This rally also comes at an interesting time seasonally. If Chinese stocks hold up through October and November, China will go into the year end asset allocation meetings for large funds looking quite good. This could kick off a second round of performance in early 2025 as large institutional money is allocated into the market.
Top 20 in US
Sector Rankings
Banks are the top ranked sector globally, as has been the case every month. This is partly because of the high number of banks, but the sector is also doing well.
Shipping we’ve spoken about.
Pharma: I need to better understand if there is a theme behind why Pharma is a top ranked sector. Below is a sample of the top ranked stocks from the YWR rankings data. Most of them are not names I’m familiar with.
Precious metals: We know why that is doing well.
Electrical Products: It’s interesting here that Fujikura, Prysmian and Nexans are all cable companies. Cables are at the intersection of both data centres and renewables.
Sector ranking trends
Country Rankings
The top ranked countries are similar to last month. It’s the US and Asia. We keep wondering if both our attention and our portfolios need to shift to Asia.
The number of top ranked US stocks has fallen and is quite close to the number of top ranked stocks from China. It will be interesting to see if China moves into the number 1 global spot next month.
Also interesting that Japan continues to rank well. The latest BofA survey did not show any particular investor interest in Japan.
These were my takeaways, but please use the links below to look through the source data.
I’ve also include a link to the monthly Tableau dashboard to look at the data by industry.