YWR: Global Factor Model

You’re doing a great job! You’ve been ahead of everyone in anticipating the new trends. Because every month you review the YWR Global Factor Model.

Now let’s do it again. Starting with the global Top 25.

Global Top 25

What do we see?

Lots of gold miners, which should continue ($5,000 gold with Jeremy Gray). And good to see AngloGold Ashanti, an interesting rerating story, in the top 25, (The AngloGold Turnaround). And worth noting that even though gold miners are some of the best ranked stocks in the world, hedge funds don’t own them (Hedge Fund Holdings Analysis).

Then KEPCO ($KEP), the Korean electric utility on a P/E of 2x 3x is also working. We flagged it last month.

The Blind Squirrel

did more work on it too. Earlier this week it was +20% in a day, but it still screens as an anomaly.

Then lots of semis in the Top 25, with SK Hynix a massive standout (P/E of 6x). SK Hynix is 11% of the ishare Korea ETF and doing yeoman’s work to drive a massive year for Korea (Who am I ETF?). Thank you Korea.

It’s also notable that semis rank well in the Global Factor model (estimate and price momentum + value), and are also a top sector in the QARV rankings (June QARV). So both models like semis.

Sector Level Trends

Everyone knows about gold and gold miners.

Everyone gets that banks and semis are doing well.

But does anyone know that Pharma is the GFM’s top ranked sector? And has been since April (A Factor Model Mystery)

I’d say the momentum in Pharma is the biggest trend nobody is talking about.

Monthly trend in sector rankings.

It’s companies like $11bn Exelixis ($EXEL) where estimates for 2025 are + 30% in 2 months.

YWR Global Factor Model Data App

Takeda Pharma ($TAK) could be interesting. Estimates are rising, but it hasn’t moved (unlike EXEL). And you get a 4% dividend yield.

If you like this type of set-up (earnings momentum score high, but price momentum score still low) we built a special dashboard for this in Tableau (Estimate and Price Scatter). The link to the Tableau Dashboard is below.

I also highlighted a well known NYC REIT scoring high on earnings momentum, but with the share price still bouncing around doing nothing.

The Sector We don’t Mention.

Now I am going to mention a sector which I noticed bubbling up in the global factor model rankings.

The estimate momentum for this sector is still in the early stages, and we need to see more proof…., and I don't want to jinx it….but ….. it’s such a hated sector that we have to mention it.

European Telcos. One of our Untouchable sectors.

I encourage you to use the Retool Data App, or the rankings spreadsheet to take a look at Telecom Italia, Orange, Telefonica and Vodafone.

This is notable because we have been on the watch for this. The set up is there. The 5G spend is done and mobile pricing is way too cheap. If a crappy turkey sandwich in the Denver airport is $15, then shouldn’t your cell phone bill be $100/month? If pricing can rise gradually, while capex is falling you have the chance for an enormous free cash flow inflection on beaten down big cap sector nobody owns. And the cherry on top is that improving the profitability of the Telecom sector has become a European strategic priority (A Secret to Making Money).

I use KOYFIN for charts and fundamentals.

County Level Trends

It’s happening. The #1 Trade (The #1 Trade, Pt. 2: China Blinks). This month China is again the country with the highest number of top ranked stocks in the factor model. And surprisingly, the US has slipped to #3 after Japan.

South Korea is pumping. And it’s interesting because it’s a mix of semis, heavy industry (HD Korea Shipbuilding and Offshore) and defense (Hanwa Aerospace).

Canada benefits from its slew of highly ranked gold miners.

Finally, I think we’re not paying enough attention to Japan. Almost every month it’s a top 5 ranked country. And it’s a big market Western fund managers have no problem owning, unlike China, Korea and Taiwan. Everyone loves Japan. And it’s in the index so when it does well it causes pain.

In the monthly trends you see the sharp fall in the number of top ranked US stocks. It’s tough for the US to score well in the factor model when there is such a discrepancy in valuations with the rest of the world.

So overall, I’d say the data confirms our big bets in Banks, China and Korea.

I encourage you to sit down with your coffee this weekend and go over the following files (links below).

• The Global Factor Model rankings.

• The Retool Factor Model Data App with estimate revision charts.

• The Tableau Dashboard.