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Importance of Industry Groups Revisited

VectorVest has always advocated buying great stocks that are rising in price in a rising market. Lately, they have also stressed the buying rising industries in stock selection. Why? When an industry group (IG) is rising, it tends to lift all stocks with the industry. What’s that old adage, A rising tide lifts all boats? It’s true in the stock market as well. When the overall market is rising, and the stocks in a particular industry are rising, the likelihood of your stock also rising is so much greater.

Take the Retail (Food) industry group for example. After moving virtually sideways for several months, the industry group started to rise in early July. By July 16 it had moved to 42 from 62 in VectorVest’s IG rankings; the average price of the group was above the 40-day SMA; and RT was rising. Using our Quicktest function, we can quickly see that 7 of 8 stocks in the IG are up more than 10% since then, even with the market downturn Sept 5 to Oct 20. Alimentation Couche-Tard (ATD.B), the top VST stock on July 16, gained 37%. The weakest VST stock, GCL, lost 11%. George Weston (WN) gained 17%; Premium Brands (PBH) 14%; Metro Inc (MRU) 20%; and even slow and steady Loblaw added 23%.

Retail Food Industry Nov 16 2014

On the other hand, it’s hard to find a gold/silver stock that’s made any money for anyone since August. The IG has been in a terrible downturn. VectorVest, by allowing us to graph the entire industry trend, helps us avoid getting into certain industries too soon, and know when to move out of a stock whose industry is starting to show signs of collapsing. Looking at the chart below, the top 10 Gold Digger stocks on June 11 gained an average of 13.95% to June 30. No losers. Those same 10 stocks, if you held them from June 11 right through to Oct 31, would have lost more than 34%.

Gold Silver Industry Graph Nov 15 2014

WEBINAR SOTW Q&A. VectorVest’s Manager of Education Brian D’Amico delivered another excellent presentation Friday showing us, Four Ways to Find Great Stocks in Hot Industry Groups.

Please join me tomorrow, (Monday) Nov. 17 at 1:00 p.m. EDT, for our regular SOTW Q&A review. We’ll take a look at the current market conditions in Realtime and follow Brian’s strategy for finding great stocks in the hottest industries. To register for the webinar, go to the Friday’s VectorVest Views, or just click on the following link:

I’ll also be presenting a special Questrade/VectorVest partnership on Wednesday this week titled, How To Develop A Winning Trading Plan. That’s Thursday, Nov. 20 at 4:30 EDT. There are always some special offers for customers of both Questrade and VectorVest, so I hope you’ll tune in to find out what they will be this month. To register, click on the following link:

That’s all for now. I’ll look forward to speaking with you and hearing from you on these Blog pages over the coming weeks and months.

Good investing everyone.

Stan Heller
Consultant, VectorVest Canada

10 thoughts on “Importance of Industry Groups Revisited

  1. I too do not use Facebook, so I am happy with a blog that can be reached directly.
    I only have one request, could you use a darker or larger font?
    As always, your help and insight are much appreciated


  2. Thanks Stan for setting up this direct blog as I do not use Facebook or the like.
    A darker or larger font would be great as well.. You are very helpful in your posts. Thanks.

  3. My initial testing indicate that it is best to look at stocks in the industry groups that have the highest RT delta over the last 10 days. In the search, I select “Return Stocks” and add some stock parameters in the search, as shown:
    Industry RT Delta 10-Day Sorted Desc
    Stock AvgVol greater than 20,000
    Stock %PRC greater than 0
    Stock Price greater than 1
    Stock RS greater than 0.98
    Stock RV greater than 1.0
    This saves a lot of time cherry picking through each industry group.

  4. Glad to see the Blog…..many thanks as I, too, am not a Facebook fan.
    Could you advise the significance of rising RT Ranking, and how we investors should use this as a tool for a “heads up” on industry changes…both up and down. My observation from the above graphs is that a ,say, 40 point change in either direction, would mean its time to pay attenition and consider (review in depth) this I G ….any suggestions or guidelines.
    Thanks Stan and keep the great work…appreciate everything that you do for the V Vest fans.

    1. Thanks Robin. What I like about the RT Ranking is that it’s movement is telling us how well the industry group is performing compared with the other industry groups. It’s similar to the RT and it’s based on RT, but often a change in RT ranking is faster and more noticeable than the RT itself because it’s move is in relation to the other 123 industries. Both are terrific indicators.

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