It’s Factor Model time. Our end of the month review of global estimate revision data to keep tabs on the evolving trends.
It’s how we catch new trends before they are news.
All the data tools are available at the bottom of the post:
YWR Factor Model Rankings Google Sheet
Factor Model Tableau Dashboard
Retool Factor Model App with AI Research Reports
Let’s start with the top ranked 25 stocks in the world. These all have a combination of strong estimate revisions, with price momentum and an attractive valuation.
YWR Top 25
Evolving Trends
Here’s what I see as I scan the data. FYI, the Retool data app is especially useful for this.
Broadening out of the commodity trade. Gold miners are the biggest theme in the market, but it has spread to platinum/palladium and copper. It’s also spreading to aluminium stocks (Alcoa, Century, Kaiser). We also see the start of positive estimate momentum in the steel sector (voestalpine, Commercial Metals, Arcelor Mittal). This is an important transition from monetary commodities (gold & silver) into industrial commodities. What big commodity could be next?
The bull market in Memory. Earnings estimates for memory stocks are going insane (SK Hynix, Micron, Seagate, Sandisk, Kioxia, Samsung).
The bull market in Chinese Equities (Insurance and Brokers). Chinese insurance stocks (China Life, New China Life, China Reinsurance, PICC, Ping An) and brokers (GF Securities, Guotai Haitong Securities, Orient Securities) are benefiting from the bull market in Chinese equities. Insurers are catching it through their investment portfolios, while brokers see it through new account openings, trading and IPO deals.
US P&C Insurance: Heritage Insurance, United Fire, Mercury General, and Allstate are all showing big earnings upgrades. It’s a combination of premium increases and strong investment income.
Tire companies: Quite a few tire companies are screening well (Hankook Tire, Yokohama Rubber, Toyo Tire).
Japanese Homebuilders: It’s interesting that Japanese homebuilders like Open House, Obayashi, lida Group,and Katitas are showing momentum because it has been our view that Japanese banks would start lending their newfound profitability into the real estate sector (The Godzilla Trade).
General Motors: The biggest trade sitting right under our noses; US autos. All the tariffs and changes to US fuel economy standards and nobody talks about US auto stocks.
Oil refining: Diesel crack spreads are surprisingly high and it’s driving positive estimate momentum for Par-Pacific, HF Sinclair, Valero, Marathon, and Philipps 66.
Industry Trends
When we analyze the top 300 ranked stocks in the world by industry precious metals is the strongest. Number 2 is ‘other metals’ (copper). The top 2 sectors in the world are mining and most funds don’t have any allocation.
In April we identified the stealth bull market in mid-sized specialty pharmaceutical companies benefiting from higher drug reimbursements staring in 2025 (A Factor Model Mystery).
Major Banks have dropped out of the Top 5 industries.
The gold trend strengthens each month. You can also see the commodity bull market broadening out into ‘Other Metals’.
Estimate-Price Scatter Chart
What we really want is a trend which is happening, but which nobody has noticed. Estimates going up, but price hasn’t reacted yet.
To help with this we have the handy dandy estimate-price scatter chart in the Tableau dashboard. It's a way to search for stocks with high estimate momentum, but low price momentum.
The whole box is good, but the more you move up and to the left, the better, but always make sure to check the data for funnies.
When I look at the estimate-price scatter chart two stocks stand out. JBS and Franklin Resources.
Estimates for this global protein behemoth are moving up, but the price of their newly created ADR is still on the lows. One of the challenges for JBS has been high US cattle prices. It’s been hard to pass high live cattle prices into processed meat and JBS have been losing money in the US beef. Recently, cattle futures have started to weaken… which could be a catalyst for JBS.
Traditional active managers like BEN, TROW, IVZ, might also be interesting. Yes, they struggling to get inflows, but they’re still hanging on to a large stock of existing AUM which automatically get revalued up by the bull market. If you dig into their earnings presentations you find they aren’t standing still. The big push is to grow in alternatives.
Private Credit BDC’s
Usually, shipping, coal miners and oil companies are top of the list for high yielding sectors. These sectors are hated, but with good cash flows and dividends.
But there’s a new most hated cash flowing sector. More hated than coal or oil.
Private credit BDC’s.
Goldman Sachs BDC, FS KKR, CION Investment, Carlyle Secured Lending, Oaktree Specialty Lending and Blackstone Secured are yielding over 10%.
If BDC’s are more hated than coal, should that make us bullish?
Country Level Trends
There are three trends at the country level.
China: China is consistently #1 or #2 and flip flops with the US for the highest number of top ranked stocks. What’s notable about this is that investors are fully allocated to one of these countries and not at all allocated to the other.
The rise of Asia: Japan, Taiwan, and South Korea always rank well. These markets are flooded with tech hardware companies with high estimate momentum. The challenge is most of us don’t know these names well. This is a focus for me and why I’m travelling more to Asia.
Commodities: Canada, Australia and South Africa score as the top countries in the world thanks in part to the strength of their mining industries. The trend behind the trend is dollar weakness. Dollar weakness leads to commodity strength which leads to the outperformance of these commodity sensitive countries.
Japan ranks well with strength across a range of sectors from tech hardware, automotive, pharmaceuticals, chemicals and engineering. I always tell myself I need to do more work on Japan.
If you need a break from your relatives this weekend make yourself a coffee and go over the data.
Below are the Google sheet with the full YWR rankings on over 5,000 stocks, the Retool Data App with the estimate momentum charts and AI research reports, and the finally the Tableau Dashboard.