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S&P 500 Sectors That Investors Should Consider

Feb 18, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

All Data and Information as of 02/15/2019 Market Close

 

  • Today we are looking at the performance of S&P 500 sectors to identify which sectors may present a strong investment opportunity and which investors may want to stay away from in 2019.
     
  • So far in 2019, the S&P 500 Index has returned 11.02% to investors, as can be seen in the table below.

S&P 500 Sector Index Performance

  1D Change MTD (TR) T3M (TR) YTD (TR) 3Y (TR) 5Y (TR)
S&P 500 CONS DISCRET INDEX 0.53% 0.47% 3.58% 10.81% 59.34% 80.22%
S&P 500 CONS STAPLES INDEX 0.97% 2.01% -1.94% 7.30% 17.65% 49.56%
S&P 500 INFO TECH INDEX 0.79% 5.03% 2.53% 12.34% 93.52% 121.97%
S&P 500 FINANCIALS INDEX 2.02% 1.96% -0.71% 10.98% 65.53% 65.59%
S&P 500 HEALTH CARE INDEX 1.47% 2.51% 1.40% 7.48% 49.33% 73.47%
S&P 500 INDUSTRIALS INDEX 1.34% 5.49% 5.79% 17.53% 53.80% 59.77%
S&P 500 ENERGY INDEX 1.61% 3.85% -0.92% 15.39% 26.29% -10.38%
S&P 500 UTILITIES INDEX 0.37% 1.79% 2.47% 5.28% 34.85% 65.22%
S&P 500 MATERIALS INDEX 1.37% 2.27% -0.57% 7.89% 42.36% 30.39%
S&P 500 COMM SVC INDEX 0.41% 0.35% 4.01% 10.75% 9.20% 30.80%
Total S&P 500 Index 1.10% 2.78% 1.96% 11.02% 55.61% 67.26%

Source: Bloomberg
 

  • On a year-to-date (YTD) basis, the S&P 500 Industrials Index is the best performing among S&P 500 sectors, appreciating 17.53% since the beginning of 2019.
     
  • Despite the S&P 500 Industrial Index’s strong rally to begin 2019, the index is still trading at reasonable multiples of 17.43x trailing 12-month earnings and 15.68x forward 12-month earnings, as can be seen in the table below.  
     
  • S&P 500 industrials stocks also appear somewhat attractive after conducting an ROE Dupont Breakdown. The S&P 500 Industrials Index maintains an ROE of 21.05%, the fourth-best among S&P 500 sectors.
     
  • Currently, the Industrial Select Sector SPDR ETF is rated as "Buy" in our ETF Sector AI Trading Signals. 

S&P 500 Sector Index Multiples, Yields, and Projected EPS Growth

  Fwd 12M P/E Ratio T12M P/E Ratio T12M EBIT/EV T12M FCF Yield FWD 12M EPS Growth (%) 3 Year Fwd EPS CAGR
S&P 500 CONS DISCRET INDEX 19.32x 22.58x 4.67% 4.17% 16.90% 14.01%
S&P 500 CONS STAPLES INDEX 17.90x 19.19x 5.43% 3.67% 7.19% 6.60%
S&P 500 INFO TECH INDEX 17.40x 19.39x 6.15% 5.42% 11.44% 9.97%
S&P 500 FINANCIALS INDEX 11.53x 13.38x 8.61% 8.11% 16.02% 12.50%
S&P 500 HEALTH CARE INDEX 15.84x 21.01x 4.43% 4.22% 32.61% 16.28%
S&P 500 INDUSTRIALS INDEX 15.68x 17.43x 5.35% 3.50% 11.15% 10.84%
S&P 500 ENERGY INDEX 17.80x 16.23x 6.14% 3.62% -8.83% 4.87%
S&P 500 UTILITIES INDEX 17.78x 18.35x 4.04% -1.33% 3.21% 4.42%
S&P 500 MATERIALS INDEX 15.38x 15.12x 6.27% 3.35% -1.69% 6.86%
S&P 500 COMM SVC INDEX 16.29x 18.57x 5.44% 4.26% 14.04% 11.77%
Total S&P 500 Index 16.22x 18.43x 5.71% 4.42% 13.65% 11.02%

Source: Bloomberg
 

  • The S&P 500 Energy Index is also performing exceptionally well so far in 2019, returning 15.39% YTD.
     
  • S&P 500 energy stocks at this time appear to be a sector that investors should approach with caution. On a 12-month forward looking basis, the S&P Energy Index is priced expensively, trading at 17.80x its forward earnings. Analysts expect S&P 500 energy stocks to observe an average 8.83% pullback in EPS over the next 12 months, the worst analyst EPS expectations among all S&P 500 sectors.  
     
  • The S&P 500 Energy Index also looks poor in terms of ROE with the average constituent maintaining an ROE of 11.22%, the second-worst among S&P 500 sectors, as can be seen in the table below.
     
  • Currently, the Energy Select Sector SPDR ETF is rated as "Buy" in our ETF Sector AI Trading Signals. 

S&P 500 Sector Index ROE Dupont Breakdown

  T12M ROE T12M Operating Margin T12M Net Profit Margin T12M Sales / Assets Assets / Equity
S&P 500 CONS DISCRET INDEX 28.01% 8.21% 6.27% 1.02x 4.30x
S&P 500 CONS STAPLES INDEX 25.87% 9.23% 6.93% 1.11x 3.19x
S&P 500 INFO TECH INDEX 34.03% 23.85% 20.76% 0.58x 2.74x
S&P 500 FINANCIALS INDEX 12.47% 22.41% 18.98% 0.07x 8.12x
S&P 500 HEALTH CARE INDEX 15.27% 8.98% 6.47% 0.83x 2.74x
S&P 500 INDUSTRIALS INDEX 21.05% 10.68% 7.40% 0.71x 3.88x
S&P 500 ENERGY INDEX 11.22% 9.12% 7.60% 0.75x 1.87x
S&P 500 UTILITIES INDEX 8.96% 16.30% 9.98% 0.24x 3.56x
S&P 500 MATERIALS INDEX 11.81% 12.08% 7.88% 0.60x 2.32x
S&P 500 COMM SVC INDEX 17.32% 18.60% 15.25% 0.44x 2.47x
Total S&P 500 Index 17.03% 13.63% 10.78% 0.33x 4.49x

Source: Bloomberg
 

  • The S&P 500 Utilities Index is lagging the broad US benchmark index on a YTD basis, returning just 5.28% since the start of the year.
     
  • Despite their lagging start to 2019, S&P 500 utilities stocks do not appear to be an attractive investment opportunity. The S&P 500 Utilities Index maintains the worst ROE among S&P 500 sector indices of just 8.96%.  
     
  • The S&P 500 Utilities Index also maintains a trailing 12-month EBIT/EV of 4.04% and a trailing 12-month free cash flow yield of -1.33%, both of which are the worst among S&P 500 sector indices.
     
  • Currently, the Utilities Select Sector SPDR ETF is rated as "Sell" in our ETF Sector AI Trading Signals. 

 

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